Analysts expect a major shock in Bitcoin supply ahead of the April halving, as BTC has fallen nearly 10% since the ETF’s approval.
Bitcoin’s supply dynamics have changed significantly since the SEC approved spot Bitcoin ETFs earlier this month. The main token has been largely volatile in recent weeks, but this volatility has remained within a very narrow price range. The price of BTC fluctuated between $41,000 and $44,000, today falling below $41,500, the lowest price in the last 30 days.
Analysts attribute these brief price movements to supply dynamics driven by the ETF market. Since yesterday, Grayscale has transferred over $1 billion in BTC to Coinbase from its ETF fund, according to data from Arkham Intelligence. With other major funds contributing this massive inflow of around 5,000-7,000 BTC per day to their custodial exchanges, only 900 BTC is mined per day.
CRAZY #Bitcoin Supply Shock Coming Soon.
If we maintain massive BTC ETF inflows, we will have thousands (5,000-7,000 BTC) purchased every day, but only 900 BTC mined every day.
People don’t realize how incredibly HUGE the supply shock will be.
Buckle up and see how frothy it gets!
— Kyle Chassé (@kyle_chasse) January 18, 2024
Despite this, a record percentage of BTC supply remains intact. Due to Bitcoin’s unique supply dynamics, analysts predict that the flagship token could experience increased supply-side illiquidity ahead of the halving, which could result in a supply shock.
While the launch of #Bitcoin ETFs offers an opportunity to “sell news,” most HODLs (unsurprisingly) have not done so.
A record percentage of BTC supply remains intact.
The new demand from ETFs, which will come slowly, not all at once, will be met with incredible… pic.twitter.com/WEbMREayuH
— Mitchell 🇺🇸🚀 (@MitchellHODL) January 18, 2024
There are hundreds of millions of dollars in #Bitcoin being sent daily from Grayscale to Coinbase to be sold.
A crazy and legitimate offer dumped on the market.
And $BTC remains stable.
Pretty incredible.
— The Wolf of All Roads (@scottmelker) January 18, 2024
At the same time, albeit slowly, we are already seeing a reduction in the supply of BTC. Over the past week, Bitcoin supply has dropped from 19.6 million to 19.4 million. Historically, the supply of tokens has never shrunk, even halving.
With just a few months to go until the next halving, the ETF market is growing rapidly and could see significant price movements in the coming months. Bitcoin has already become the second largest ETF in the US, overtaking silver, indicating growing involvement from traditional institutions.
All these factors could result in one of the most intriguing and unpredictable halvings the market has ever seen since the birth of cryptocurrencies.