Market analysts are predicting a substantial supply shock for Bitcoin in the lead-up to April’s halving, particularly in the aftermath of the SEC’s approval of spot Bitcoin ETFs earlier this month. Despite Bitcoin experiencing nearly a 10% dip since the ETF approval, its price has exhibited notable volatility within a relatively narrow range of $41,000 to $44,000, reaching a 30-day low below $41,500.
Experts attribute these short-term price fluctuations to shifts in supply dynamics influenced by the ETF market. Notably, Grayscale, a major player, has reportedly transferred over $1 billion worth of BTC to Coinbase from its ETF fund in the past day alone. Other significant funds are also contributing to this influx, with approximately 5,000 to 7,000 BTC being added daily to custodian exchanges, while only 900 BTC is being mined daily.
Despite this increased activity, a considerable percentage of the Bitcoin supply remains untouched. Analysts speculate that, due to these unique supply dynamics, Bitcoin might encounter significant supply-side illiquidity before the upcoming halving event, potentially triggering a supply shock.
Simultaneously, there is evidence of a gradual reduction in BTC supply. Over the past week, Bitcoin’s supply has decreased from 19.6 million to 19.4 million. This contrasts with historical trends, as the token’s supply has typically not diminished leading up to a halving.
With the halving just months away, the ETF market is experiencing rapid growth, positioning Bitcoin as the second-largest ETF commodity in the U.S., surpassing silver. This suggests increasing participation from traditional institutions. The combination of these factors could lead to one of the most intriguing and unpredictable halving events in the cryptocurrency market since its inception.
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