The shrinking supply of Bitcoin is becoming a reality in the market. Each year, fewer Bitcoins remain in circulation, and changes in this regard are starting to significantly impact cryptocurrency prices.
Shrinking Bitcoin Supply
Bitcoin has a hard cap of 21 million coins, with 93% already mined. The latest halving in April reduced miner rewards, leading to fewer new coins entering circulation. Additionally, around 70% of Bitcoin is held in long-term storage, lowering market liquidity.
Michael Saylor’s Accumulation Strategy
Michael Saylor, executive chairman of Strategy, has focused on accumulating Bitcoin since 2020. His company holds over 2.75% of the total Bitcoin supply, raising concerns among experts about a potential supply crisis. Strategy's aggressive buying means fewer coins are available on exchanges, leading to decreased liquidity.
Increased Institutional Demand
Institutional investors are increasingly turning to Bitcoin through instruments like exchange-traded funds. For instance, BlackRock's trust has attracted billions in investments. These purchases further tighten liquidity in the market as many Bitcoins are moved into custody.
The situation regarding the decreasing Bitcoin supply and accumulation by institutional players raises new questions for the market. The future of Bitcoin may depend on new levels of demand and behavior of major players, which in turn creates the potential for price shock.
