According to a recent analysis by Bybit, the available supply of Bitcoin on exchanges is rapidly decreasing and could potentially be depleted within the next nine months. Data from CryptoQuant shows that only 2 million BTC is currently present on centralized crypto trading platforms, representing less than 10% of the entire network’s supply. If a daily inflow of $500 million to Bitcoin spot ETFs continues, approximately 7,142 bitcoins will leave exchange reserves daily, leading to the depletion of remaining reserves in nine months. Since the launch of U.S. Bitcoin spot ETFs in January, $12.4 billion in net inflows have been absorbed, which is equivalent to about 221,000 BTC being taken off the market, significantly impacting the market.
The upcoming Bitcoin halving event, which is set to occur later this week, will cut Bitcoin’s supply inflation rate in half for the fourth time in the network’s history. With the asset’s daily supply issuance shrinking from 900 BTC to 450 BTC starting around April 20, there will be an even greater shortage of supply in the market. Some entities, such as Blackrock and other ETFs, are reportedly buying in excess of 10,000 bitcoins a day, raising concerns about what will happen when only 450 new bitcoins are mined daily. This impending supply squeeze has the potential to significantly impact the market and could lead to further volatility in Bitcoin’s price.
Despite the optimistic outlook surrounding the Bitcoin halving event and the potential for a new all-time high, Bybit’s analysis also highlights the possibility of a short-term selloff after the halving, particularly from weak mining firms. Unprofitable miners may start selling their Bitcoin reserves to support their operations, although this could lead to a decrease in overall sell-side supply to centralized exchanges once their reserves are depleted. While miners showed signs of unloading their reserves earlier in the current cycle, there is historical evidence to suggest that Bitcoin tends to rally twelve months after each halving, leading to the possibility of a new all-time high in the future.
It is important to note that the figures around ETF inflows cited by Bybit may be outdated, as the funds have seen minimal net inflows since the beginning of April, alongside a decline in Bitcoin’s price from $69,000 to $62,000 during that time. Some attribute this price drop to escalating geopolitical conflicts between Israel and Iran, while others speculate that investors may be selling their BTC in anticipation of the U.S. tax season. However, despite short-term market fluctuations and uncertainties, the overall trend of diminishing Bitcoin supply on exchanges and the upcoming halving event could have significant implications for the cryptocurrency market in the near future.
As the supply of Bitcoin on exchanges continues to dwindle and with the upcoming halving event reducing the daily supply issuance, there is growing anticipation of a potential market upheaval. The actions of miners, ETFs, and institutional investors will play a crucial role in shaping the future landscape of the cryptocurrency market. While there are concerns about the short-term effects of a potential selloff, particularly from weaker mining firms, the historical trends and potential for a new all-time high post-halving suggest that Bitcoin’s long-term trajectory remains optimistic despite current uncertainties.
