Swiss bank Sygnum has highlighted a significant contraction in Bitcoin’s circulating supply, noting a 30% reduction in liquidity over the past 18 months. This tightening supply dynamic is poised to influence market volatility, potentially driving upward price movements in the near term. The bank’s latest market outlook underscores the impact of sustained demand amid shrinking available BTC tokens.
The report attributes this liquidity squeeze to increased inflows into Bitcoin ETFs and growing governmental acceptance of Bitcoin reserves. These factors are contributing to what analysts describe as a ‘demand shock’, where the number of buyers exceeds the circulating Bitcoin supply, intensifying market pressure and limiting token availability.
Data from Sygnum reveals that since late 2023, over one million BTC have been withdrawn from exchanges, predominantly acquired by institutional ETF investors and corporate entities. This accumulation trend is constraining liquidity, complicating traders’ ability to manage positions during volatile market episodes.
Additionally, macroeconomic factors such as instability in the U.S. Treasury market and a depreciating U.S. dollar are enhancing Bitcoin’s appeal as a safe-haven asset. The report emphasizes that declining bond prices and rising federal debt levels are redirecting investor capital towards gold and Bitcoin, reinforcing the cryptocurrency’s role as a strategic hedge amid fiscal uncertainties.