Bitcoin to Face Supply Shock as ETF Purchases Surge and Halving Approaches

U.S. spot ETF providers currently hold more than 112,000 bitcoins.

Bitcoin may be on the cusp of a major supply shock due to two key events: the upcoming April halving and a recent surge in demand for newly approved bitcoin exchange-traded funds (ETFs).

Bitcoin is halved every four years, and the block rewards that miners receive have also been cut in half. This reduces the amount of new supply of bitcoin entering the market, which tightens the overall supply. With only a few months until the next halving, supply is set to fall sharply even as demand rises.Bitcoin mining

Much of this demand comes from institutional investors through bitcoin ETFs. According to Bloomberg analyst Eric Balchunas, top ETF providers such as BlackRock purchased more than $4.3 billion worth of bitcoin through these funds in just seven days. These ETFs quickly amassed more than 112,000 bitcoins, underscoring the growth of institutional interest in bitcoin exposure.

The combination of surging demand and shrinking supply set the stage for a supply shock. on-chain data from Blockware’s Mitchell Askew shows that more than 70 percent of bitcoin has not flowed in for more than a year, suggesting limited sell-side liquidity.

Over time, new demand for ETFs will be absorbed by “incredible supply-side illiquidity,” Askew said. This could lead to increased competition for the limited amount of bitcoin available, which could lead to an increase in its price.

However, whether a real shock will occur depends on a number of factors. These include potential price volatility, changing regulations, and changes in overall demand.Litecoin DOGE Miner

Bitcoin prices stagnated in the first week of spot ETF trading. According to CoinGecko, the bitcoin price is hovering around $39,500 at the time of writing, down more than 7 percent in the past seven days.