A recent analysis from crypto exchange Bybit has raised the alarm that there could be a possible shortage of Bitcoin (BTC) on exchanges by the end of 2024 if demand remains at similar levels.
The report predicts that reserves could be completely depleted within the next nine months if current withdrawal rates continue – currently around 7,000 BTC per day. The scarcity forecast is closely related to the expected halving event in 2024, which will reduce Bitcoin production on each block by half.
Alex Greene, senior analyst at Blockchain Insights, said:
“The rapid depletion of Bitcoin reserves is preparing the market for a possible liquidity crisis. As reserves dwindle, the market’s ability to accommodate large sell orders without impacting price becomes weaker.”
ETF demand
According to Bybit's report, institutional investors have significantly increased their Bitcoin investments following the recent regulatory approval of spot Bitcoin ETFs in the US, boosting demand amid shrinking supply.
Greene noted:
“The surge in institutional interest has stabilized and dramatically increased demand for Bitcoin. This increase is likely to exacerbate shortages and drive prices higher post-halving.”
The Newborn Nine ETFs have been purchasing BTC at a rate of about $500 million per day – which equates to a withdrawal rate of about 7,142 BTC per day from foreign exchange reserves.
Meanwhile, only about 2 million BTC remain in centralized foreign exchange reserves. Bybit warned that exchange supplies could disappear by early next year if demand remains at high levels after the halving reduced daily mining supply to 450 BTC.
Miner sales fall
The next halving will reduce the mining reward from 6.25 to 3.125 Bitcoins per block, further limiting the new supply of Bitcoins entering the market. This programmed reduction mimics resource scarcity, similar to that of precious metals, and aims to control inflation and increase the value of Bitcoin.
Miners will face lower incentives and higher production costs, which will likely reduce the frequency with which Bitcoin is sold immediately after creation. This decline in miner sales will contribute to the scarcity of Bitcoin on public exchanges and further drive prices higher.
Maria Xu, a cryptocurrency market strategist, said:
“Miners are preparing for higher costs and lower rewards. Many may sell some of their reserves before the halving to maintain operations and may temporarily increase supply before a long-term decline occurs after the halving.”
Bybit's analysis suggests that Bitcoin supply depletion represents a critical and immediate issue with significant implications for Bitcoin pricing and investment strategies.
However, the exchange remains optimistic about the coming months, anticipating that the drop in supply could fuel a “fear of missing out” (FOMO) among new investors – potentially driving the price of Bitcoin to unprecedented levels.
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