Bitcoin faces a unique situation that could cause a significant disruption in its supply. This is a result of two key factors: the upcoming halving in April and a surge in demand from newly approved Bitcoin exchange-traded funds (ETFs).
The halving event, which occurs approximately every four years, involves a reduction in the block reward for miners. This reduction cuts the new supply of Bitcoin entering the market, creating a scarcity of available coins. With the next halving just a few months away, the supply of Bitcoin is set to decrease significantly while demand continues to rise.
Institutional investors, particularly through Bitcoin ETFs, are driving much of this increased demand. Major ETF providers like BlackRock have already invested over $4.3 billion in Bitcoin through these funds within a short span of seven days. This accumulation of more than 112,000 BTC indicates a growing interest in Bitcoin exposure among institutional investors.
The combination of surging demand and shrinking supply sets the stage for a potential supply shock. Analysis of on-chain data shows that over 70% of the existing Bitcoin supply has not moved in over a year, indicating a limited availability of sell-side liquidity.
While the new demand from ETFs will likely be absorbed over time, there may be intensified competition for the limited available Bitcoin, potentially driving up its price. However, the occurrence of an actual supply shock will depend on various factors, including price fluctuations, regulatory changes, and overall demand.
Bitcoin’s price has experienced some stagnation during the initial week of spot ETF trading. Currently, it is hovering around $39,500, reflecting a decrease of more than 7% in the last seven days, according to data from CoinGecko.