Recent analysis from crypto asset exchange Bybit suggests that there may be a shortage of BTC by the end of 2024 if the demand for BTC remains at the same level. The report predicts that if the current withdrawal rate continues (approximately 7,000 BTC per day), the BTC reserves could be depleted within the next nine months. This shortage prediction is closely related to the BTC halving event in 2024, which will decrease the BTC production by half in each block.
Alex Greene, a senior analyst at Blockchain Insights, states that the rapid depletion of BTC reserves is serving as a reminder to the market to prepare for a potential liquidity crisis. “As reserves decrease, the market’s ability to absorb a large number of sell orders without affecting the price will weaken,” Greene explains.
According to Bybit’s report, institutional investors have significantly increased their BTC investments after the recent approval of spot BTC ETFs by regulatory agencies in the United States. This increased institutional interest is driving the growth in BTC demand amidst a decreasing supply. Greene points out that this increase may intensify the phenomenon of BTC shortage and drive up prices after the halving event.
The nine new ETFs are purchasing BTC at a rate of approximately $500 million per day, which is equivalent to extracting around 7,142 BTC from exchange reserves daily. Meanwhile, centralized exchange reserves are left with only around 2 million BTC. Bybit warns that if the demand remains high even after the daily mining supply is halved to 450 BTC, the exchange supply may disappear by early next year.
The next halving will reduce the mining reward from 6.25 BTC to 3.125 BTC per block, further limiting the entry of new BTC supply into the market. This programmed reduction simulates scarcity of resources, similar to the scarcity of precious metals, with the aim of controlling inflation and increasing the value of BTC. Miners will face the challenge of reduced rewards and increased production costs, which is likely to lower the frequency of immediate selling after BTC generation. The decrease in miner sales volume will result in scarcity of BTC on public exchanges, further driving up prices.
Maria Xu, a crypto asset market strategist, states that miners are adapting to the increase in costs and decrease in returns. “Many miners may sell a portion of their reserves before the halving to sustain operations, which may temporarily increase the supply of BTC. However, a long-term decrease in supply is certain after the halving,” Xu explains.
Bybit’s analysis highlights that the tightening of BTC supply is a critical and urgent issue that has significant implications for BTC pricing and investment strategies. However, the exchange remains optimistic about the next few months and believes that the decrease in supply may intensify the “fear of missing out” (FOMO) among new investors, potentially driving BTC prices to unprecedented levels.
