The exponential rise in Bitcoin demand is outpacing supply. Currently, miners are producing around 1,000 BTC per day, while spot exchange-traded funds (ETFs) have acquired over 10,000 BTC in just the last two days. What implications does this have for the market, and how will the April halving event affect the situation?
ETFs have confidently been cornering the Bitcoin market: from February 11 to 13, they have drawn in 10,280 BTC, equivalent to nearly half a billion dollars.
Morgan Creek's founder, Anthony Pompliano, remarks on the situation: "Wall Street loves Bitcoin. Currently, the demand for BTC is 12.5 times higher than the daily mining rate. In two days, ETFs have absorbed 5% of the total Bitcoin trading volume for 30 days."
Leading the investment charge is iShares Bitcoin Trust (IBIT) by BlackRock, bolstering its BTC reserves by $374.7 million. The Fidelity Wise Origin Bitcoin Fund clinched the second spot in this liquidity hunt with BTC acquisitions worth $151.9 million, followed by Ark Invest’s 21Shares with $40 million.
At the same time, several Bitcoin funds recorded net outflows: notably, Grayscale (whose analysts accurately foresaw the timing of the current bull run) with a $95 million decrease, and Invesco Galaxy with a $20.8 million reduction. Yet, these withdrawals couldn't dampen the enormous market appetite for BTC, which confidently refreshed its two-year high.
Why Is Bitcoin a Scarce Asset?
The scarcity stems from the fact that miners cannot keep up with the soaring demand: they are mining ten times less than what Bitcoin ETFs are purchasing. If you're familiar with Bitcoin’s technology, you'd know it's impossible to mine more BTC than the blockchain algorithm dictates. Furthermore, miners are not obligated to sell the coins they earn as rewards immediately.
Hence, the current shortfall is being compensated by exchanges, where only about 10% of the maximum supply (21 million coins) remains available for purchase.
Market Drivers
The surge in price is propelled by:
- ETF demand;
- Speculation by major investors;
- The anticipation of the halving, which will further halve the production rate of new coins.
Pompliano believes the price of Bitcoin will continue to rise, potentially reaching $55,000.
A similar trend was observed on February 9-10 when ETFs took in about 12,700 BTC worth $541.5 million, whereas miners added only 980 new BTC. This discrepancy between demand and supply allowed Bitcoin to hit $47,705, marking a 5% increase.
BTC's price is now directly influenced by its circulating supply. Source: Blockchain.com
In summary, the integration of ETFs has had a substantial impact on Bitcoin’s price, with the forthcoming halving serving as a catalyst for even greater growth. The increased ETF demand accentuates Bitcoin's inherent scarcity, making the $200,000 per BTC forecasts increasingly plausible.
The potential liquidation of FTX assets could theoretically temper this frenzy. The bankrupt exchange is awaiting court permission to liquidate $3.4 billion in various crypto assets. However, betting against the current bullish trend, even with this significant bearish factor, is evidently not the advisable strategy.
