The Bitcoin exchange reserve, which measures the total amount of Bitcoin available on exchanges, has hit a three-year low as of June 19, 2024. This significant drop indicates low selling pressure and could lead to a supply shock as institutional investors continue to accumulate Bitcoin.
Decline in Exchange Reserves
Analytics from CryptoQuant show that there are currently 2,825,703 Bitcoin left on exchanges, a sharp decline from the 3,039,000 Bitcoin available in January 2024. Low exchange reserves suggest a limited supply of Bitcoin available for purchase, which can drive up prices if demand increases.
Impact of Bitcoin ETFs
The approval of Bitcoin ETFs in the United States in January 2024 has significantly influenced Bitcoin’s supply dynamics. Asset managers like BlackRock have been accumulating Bitcoin, adding pressure on the available supply. As of June 6, BlackRock’s iShares Bitcoin Trust (IBIT) held approximately 274,000 Bitcoin. BlackRock’s ETF is just one of 11 Bitcoin ETFs currently trading in the United States.
In May 2024, monthly inflows into digital asset funds reached $2 billion, largely driven by Bitcoin investment funds and products. According to the June 17 CoinShares Weekly Fund Flows report, Bitcoin investment vehicles globally hold nearly $73 billion in Bitcoin. However, the same report noted $621 million in weekly outflows for the week of June 15, 2024, marking the largest outflow since March 22, 2024. CoinShares attributed this to “more hawkish-than-expected” comments from the Federal Reserve, suggesting high interest rates would persist, leading to a capital flight from fixed-supply assets like Bitcoin.
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Institutional Adoption and Market Dynamics
Despite increased institutional interest, industry experts like Franklin Templeton CEO Jenny Johnson believe institutional adoption is still in its early stages. Speaking to CNBC, Johnson stated, “This is really the first wave of the early adopters, and I think the next wave is the much bigger institutions.” If this prediction holds true, further institutional investment could exacerbate the current low supply, driving prices even higher.
The April 2024 Bitcoin halving has also contributed to the constrained supply. Before the halving, miners received 6.25 Bitcoin per block. Now, they receive only 3.125 Bitcoin per block, reducing the rate at which new Bitcoin enters the market. This decrease in mining rewards further limits the supply, adding upward pressure on Bitcoin prices.
