Understanding Bitcoin Supply & Demand In Light of ETF Approval

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• The dwindling supply of Bitcoin aligns with a period of high expectations for the approval of Bitcoin-based exchange-traded funds (ETFs) by U.S. regulators.
• When demand rises and supply decreases, prices tend to increase as buyers compete for limited quantities.
• The programmed halving of Bitcoin rewards paid to miners has historically triggered significant bullish runs in the cryptocurrency’s history.

The ongoing decline in the current supply of Bitcoin on exchanges raises speculation about what might happen in the supply after the approval of spot Bitcoin ETFs.

Bitcoin Exchange Supply and ETF Approval

According to data analyzed by cryptocurrency experts, the amount of Bitcoin on all cryptocurrency exchanges has reached a historic low. The current scarcity of Bitcoin supply coincides with a period of high expectations for the approval of Bitcoin-based exchange-traded funds (ETFs) by U.S. regulators.

According to the law of supply and demand, this decreasing supply could potentially increase Bitcoin prices. When demand rises and supply decreases, prices tend to increase, especially when buyers compete for limited quantities of the asset. CryptoBusy explained this dynamic: “When demand is high and supply is low, prices usually rise. Buyers pay more for scarce assets.”

It is believed that the approval of spot Bitcoin ETFs by the SEC could likely increase demand and further reduce the already limited supply. Spot Bitcoin ETFs are valued 1:1 with actual Bitcoin held by the ETF provider. This means that companies looking to launch Bitcoin ETFs would need to purchase cryptocurrency to support the shares. Major ETF providers like iShares and Ark Invest could buy millions of dollars worth of Bitcoin from exchanges like Coinbase.

CryptoBusy stated, “if companies purchase $1 million worth of Bitcoin from their chosen exchange, they will need real Bitcoin to support ETF shares.” This ETF-induced demand is expected to put additional pressure on the decreasing supply on exchanges.

Bitcoin Halving Factor

In addition to supply scarcity, there is also the upcoming Bitcoin halving expected in about 157 days. The programmed halving of Bitcoin rewards paid to miners has historically triggered significant bullish runs in the cryptocurrency’s history. Previous halvings led to price increases of +7,745% in 2013, +460% in 2017, and +670% in 2021.

CryptoBusy said, “Historically, BTC prices have risen dramatically 12 months after each halving… And the market is already poised for a pump after each halving!” With the upcoming halving, buyers seem to be accumulating Bitcoin in anticipation of post-halving price increases.

Some experts suggest that decreasing exchange reserves and the upcoming halving could create the “perfect storm” to increase the value of Bitcoin. Rather than selling to meet growing demand, supporters advise holding Bitcoin to capitalize on expected gains.