Institutions May Encounter Challenges as Bitcoin Supply Tightens Amid Growing Adoption

• Individuals currently control a staggering 69% of Bitcoin’s total supply, implying a potential scarcity that could affect institutional buyers significantly.

• Only 5.7% of Bitcoin remains undistributed, suggesting that scarce resources may drive prices higher as institutional demand increases.

• As highlighted by analysts, companies looking to acquire Bitcoin may face serious challenges due to diminishing supply in OTC markets.

The growing disparity between Bitcoin supply and demand foreshadows potential price surges as institutions grapple with acquiring this scarce asset.

Institutions Face Scarcity as Bitcoin Supply Declines

A recent update from Bitwise Asset Management revealed a concerning trend for institutions aiming to invest in Bitcoin. Based on their findings, approximately 7.5% of Bitcoin is deemed lost, highlighting a diminishing supply that institutional investors must navigate. Beyond individual holders, exchange-traded products and funds only control around 6.1% of the total Bitcoin supply.

Adding to the intrigue, the mysterious wallet of Satoshi Nakamoto retains about 4.6% of Bitcoin, while businesses and governments hold just 5.8%.

As the manager notes, institutions seeking Bitcoin will primarily engage with private investors willing to part with their assets. This raises the stakes in the ongoing marketplace dynamic.

“That market dynamic between buyers and sellers could get very interesting,” the analyst noted.

Hunter Horsley, CEO of Bitwise, emphasized the apparent disconnect between steady demand from corporates and the downward pressure on Bitcoin’s price. He stated, “Every new buyer must find a seller. Obvious but important as ever,” underscoring the critical balance between supply and demand.

Is a Bitcoin Supply Shock Coming?

Meanwhile, only 5.7% of Bitcoin is left to be mined, and the scarcity is exacerbated by dwindling supplies in OTC markets. Analysts have reported that merely 140,000 BTC remains available in these markets.

“There’s almost no Bitcoin left even for institutions,” the crypto analyst warned, drawing attention to the urgent situation.

The total accumulation from ETFs last month reached 50,000 BTC, yet price movements remained lackluster, indicating a reliance on OTC transactions to bypass price spikes.

As noted, this approach may soon become ineffective as OTC supplies run out.

“Every billion dollars that flows into BTC elevates its price by 3-5%. That’s why the drying up of OTC markets is so concerning,” the analyst remarked.

Should institutions like MicroStrategy continue their aggressive purchasing strategies or if ETFs uphold their momentum, we could witness a swift depletion of OTC Bitcoin. This scenario could escalate if governments assume a role as major buyers.

Recently, MicroStrategy acquired 7,633 BTC for around $742.4 million, making it their fifth significant purchase this year and bringing their total holdings to an impressive 478,740 BTC, valued at about $47.12 billion.

Furthermore, institutions like BlackRock have started to exert pressure as evidenced by their reported acquisition of $1 billion worth of Bitcoin in January. They recently bought 227 BTC, as revealed by Arkham Intelligence.

As supply tightens, the shift may force institutional buyers onto exchanges, thereby significantly impacting Bitcoin’s market price.

This looming supply shock becomes critical as Bitcoin’s global acceptance accelerates. BlackRock previously highlighted that cryptocurrency adoption outpaced that of the internet and mobile technologies, reaching 300 million users in record time.

Brian Armstrong, CEO of Coinbase, offered a predictive insight regarding this trend, stating, “Bitcoin adoption should reach several billion people by 2030 at the current rates.” He acknowledged that despite the variances in how the starting points for these technologies are defined, the overall trajectory supports substantial growth.

Conclusion

In summary, as individual holders maintain control of a predominant share of Bitcoin’s supply, institutions are faced with mounting challenges in their acquisition strategies. The ongoing tightening of Bitcoin supply may lead to higher market prices as demand outstrips availability, suggesting that the crypto landscape could soon experience significant shifts.