In a technical analysis of Bitcoin (BTC) trends, an expert in the field expresses optimism regarding the cryptocurrency, asserting the imminent occurrence of what he terms a “supply shock of all supply shocks” following the forthcoming reduction of miner rewards on the network, expected to take effect in approximately two months.
The upcoming event, known as the Bitcoin halving, commands attention as it is hard-coded into the protocol to occur roughly every four years or after the completion of 240,000 blocks. This eventuality will entail a substantial decrease in the issuance of new coins, consequently rendering Bitcoin increasingly deflationary and potentially exerting upward pressure on its market valuation. Notably, this projection takes into account the anticipated surge in demand for Bitcoin throughout the year 2024.
Presently, the Bitcoin network facilitates the release of 6.25 BTC approximately every 10 minutes, resulting in a daily mining output of 900 BTC. Following the halving, this issuance rate will diminish by half to 450 BTC per day. The abrupt contraction in available supply, particularly in light of recent developments such as the approval of spot Bitcoin exchange-traded funds (ETFs) by the United States Securities and Exchange Commission (SEC) in mid-January 2024, underscores the potential magnitude of the impending supply shock.
Spot Bitcoin ETFs represent a financial instrument enabling investors to access Bitcoin’s value directly, bypassing the complexities associated with storing private keys, as custody responsibilities are assumed by regulated entities like Coinbase Custody. Since their introduction in January, these spot Bitcoin ETFs have collectively acquired over 160,000 BTC. Of particular significance is the pace at which these ETFs continue to accumulate Bitcoin, with the current daily inflow estimated at 5,800 BTC. Maintaining this influx post-halving could feasibly surpass the rate of newly minted coins, thereby precipitating what the analyst characterizes as an unparalleled supply shock, where demand significantly outstrips available supply, consequently propelling prices upwards.
Additionally, attention is drawn to the increasing Bitcoin reserves held by spot Bitcoin ETF issuers, such as BlackRock and Fidelity, which are rapidly approaching the holdings of MicroStrategy, a prominent business intelligence firm known for its significant Bitcoin treasury holdings. Data from Bitcoin Treasuries indicates that MicroStrategy presently controls 190,000 BTC, having recently augmented its holdings by 850 BTC on February 6. In contrast, spot Bitcoin ETF issuers collectively acquired 4,189 BTC on the same day, while Grayscale, a prominent cryptocurrency investment firm, divested 3,427 BTC. As of February 6, BlackRock, Fidelity, Bitwise, and other issuers command a combined Bitcoin reserve totaling 659,401 BTC, a figure that continues to rise and now exceeds MicroStrategy’s holdings, albeit inclusive of assets held by the Grayscale Bitcoin Trust (GBTC), which is undergoing gradual liquidation.