A recent analysis conducted by crypto exchange Bybit has brought to light a concerning prediction regarding the potential shortage of Bitcoin (BTC) on exchanges by the end of 2024 if the current levels of demand persist. The report suggests that reserves could be completely exhausted within the next nine months if the withdrawal rates continue at their current pace, which stands at around 7000 BTC per day. This shortage forecast is intrinsically linked to the upcoming halving event in 2024, which is expected to reduce the production of Bitcoin on each block by half. Senior analyst Alex Greene from Blockchain Insights has remarked that this rapid depletion of Bitcoin reserves could result in a liquidity crisis for the market, with dwindling reserves potentially diminishing the market’s capacity to accommodate large sell orders without adversely affecting the price.
The Bybit report highlights that institutional investors have significantly raised their Bitcoin investments following recent regulatory approvals of spot Bitcoin ETFs in the United States, thereby escalating demand amid a backdrop of diminishing supply. The surge in institutional interest has not only stabilized but markedly increased the demand for Bitcoin. This surge is anticipated to intensify the scarcity of Bitcoin and propel prices higher subsequent to the halving event. Notably, The Newborn Nine ETFs have been acquiring BTC at a rate of approximately $500 million per day, resulting in a withdrawal rate of around 7,142 BTC daily from exchange reserves. Alarmingly, there are only approximately 2 million BTC remaining in centralized exchange reserves at present.
Bybit has cautioned that exchange supplies could potentially deplete by early next year if the high demand continues post-halving, subsequently shrinking the daily mining supply to 450 BTC. The forthcoming halving will reduce the mining reward from 6.25 to 3.125 bitcoins per block, further constraining the influx of new bitcoins into the market. This deliberate reduction in supply echoes the concept of resource scarcity, akin to precious metals, and aims to regulate inflation while bolstering the value of Bitcoin. As miners grapple with decreased incentives and elevated production costs, there is a likelihood of a reduction in the immediate sale of newly generated bitcoins, augmenting the scarcity of Bitcoin on public exchanges and consequentially pushing prices upwards. Cryptocurrency market strategist Maria Xu points out that miners are adapting to heightened costs and reduced rewards, contemplating selling a portion of their reserves before the halving to maintain operations, which may temporarily increase supply before a sustained decline in the post-halving period.
Bybit’s analysis underscores the critical and imminent nature of the tightening Bitcoin supply, positing substantial repercussions for Bitcoin’s pricing and investment strategies. Despite the prevailing concerns, the exchange maintains an optimistic outlook for the upcoming months, positing that the decrease in supply could potentially spark a “fear of missing out” (FOMO) among new investors, potentially propelling Bitcoin’s value to unparalleled heights.