As a financial analyst, I’m closely observing the growing integration of Bitcoin within conventional financial markets and the ongoing debate about a potential U.S. strategic reserve for BTC. These developments have sparked speculation among experts that we might experience a significant supply shock during this market cycle. Such an event could potentially upend the established 4-year price cycle theory, leading to unprecedented growth in Bitcoin’s value.
However, a new report indicates that such a supply shock is unlikely to happen in 2025.
Analyzing Bitcoin Long-Term Holder (LTH) Supply
According to a report by CEX.IO, recently shared with CryptoPotato, discussions about Bitcoin’s limited supply have been intensified due to its halving, increased institutional interest, and the debut of US-based spot BTC ETFs. However, comprehensive data presented in the report suggests otherwise, indicating instead a robust supply system characterized by active long-term holders, ETF activity, and dynamic liquidity trends. This system appears well-equipped to withstand potential disruptions.
The crucial aspect of this evaluation revolves around the post-halving actions of Long-Term Holders (LTH). Typically, halving occasions lead to a significant shift in coins moving from LTH to short-term holders (STH), which enhances market fluidity. In 2024, for instance, LTH’s control over the supply decreased by 9%, resulting in approximately 1.58 million Bitcoin being made available on the market.
In past years following Bitcoin’s halving, there has been an average decrease of around 16% in the proportion of Bitcoins held by long-term holders (LTH). This trend suggests that about 1.4 million Bitcoins could move from LTH to short-term holders (STH) in the year 2025. The report indicates that this shift is likely due to large institutions or governments buying Bitcoin, which may prompt long-term holders to sell some of their coins. This sale could help alleviate potential supply limitations brought about by increased demand.
ETF Dynamics, OTC Activity, and Market Liquidity
On closer analysis, the impact of ETF activity on supply shocks seems less significant. Even though U.S. spot Bitcoin ETFs gathered approximately 1.13 million BTC in 2024, most of this amassment was due to cash-and-carry trades rather than direct investments. These arbitrage strategies, which rely on derivatives such as CME futures, maintain a balance between supply and demand without putting direct pressure on the spot markets.
Furthermore, at present, Exchange-Traded Funds (ETFs) represent only about 3.5% of the overall Bitcoin trading activity. This means they have limited ability to cause a significant disruption in the supply balance within the system.
According to CEX.IO’s analysis, market liquidity and the amount of reserves held by exchanges are significant factors. In 2024, exchange Bitcoin reserves reached an all-time low, but most withdrawals indicated transfers to cold storage instead of being sold off, demonstrating a long-term belief in the asset.
At the same time, Over-the-Counter (OTC) platforms significantly boosted their Bitcoin reserves by more than 200,000 BTC. This suggests a shift in liquidity towards various holders rather than a complete drain. The combination of this dispersal and consistent daily transaction volumes implies a market that is both dynamic and well-balanced.
In summary, it seems that market depth indicators are showing an enhancement in liquidity situations as USD-based liquidity increases by 61% in 2024, even with a decrease in BTC-based depth. This strengthening resilience is evident. Moreover, larger exchanges are gaining more control over the market share, and US platforms are growing their dominance. Consequently, the liquidity scene appears prepared to manage any potential surge in demand during 2025.
Collectively, these elements underscore the idea that Bitcoin’s supply will stay robust, reducing the probability of a substantial supply disruption in the upcoming year. In fact, the report indicates that the market is gearing up for steady progression, adhering to the established 4-year cycle pattern.
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2025-01-10 10:35