Bitwise Europe Research Director Andre Dragosch highlighted a growing concern in the Bitcoin (BTC) market. Dragosch noted that institutions are currently absorbing nearly all newly issued Bitcoin supply.
Institutions Collect Newly Issued BTC
In a recent post on his X account, Dragosch emphasized that approximately 164,000 BTC issued annually are largely purchased by institutional buyers, indicating a significant imbalance between supply and demand. The situation becomes more critical as other significant buyers are not included in the calculation. These include purchases by exchange-traded funds (ETFs), governments, and cryptocurrency exchanges, as well as demand from decentralized finance (DeFi) protocols and smart contracts. Dragosch's comment reveals a more severe supply shortage than most market participants realize. The overwhelming institutional demand is predicted to be much higher, which could further tighten the supply as large-scale buyers like ETFs and governments increase their Bitcoin purchases.
Potential Effects of a Supply Crisis
The potential supply crisis highlighted by Dragosch could have profound effects on Bitcoin and the altcoin market. A significant supply shortage could effectively raise the price of the largest cryptocurrency due to demand exceeding the current supply. This scenario is expected to have broader impacts on the cryptocurrency market, directly affecting trading volumes and liquidity on various crypto platforms. According to CoinMarketCap data, out of the total supply of 21 million Bitcoin, 19.75 million have been mined and circulated. Not all of these BTC are accessible. It is estimated that between 3 to 4 million BTC are lost, meaning that 15 to 20% of the circulating supply is lost and not directly accessible, supporting a potential supply crisis.
Overall Conclusions
The threat of a supply shortage in the Bitcoin market is heightened by the growing demand from institutional investors. If large-scale buyers like ETFs and governments continue to increase their purchases, this could further elevate Bitcoin prices and impact the entire cryptocurrency market. The market should be prepared for potential changes in liquidity and trading volumes.
Therefore, the potential effects of a supply shortage in the Bitcoin market could be widespread, impacting not only the price of Bitcoin but also the markets for other cryptocurrencies. Investors and market participants should closely monitor the situation as it develops.
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