Bitcoin Supply Crisis: Are Institutions Hoarding the Future of Cryptocurrency?

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<a href="https://investment-policy.com/btc-usd/">Bitcoin</a> bottleneck: Demand outmints supply, who’s to blame?

The Bitcoin market is undergoing a significant transformation due to an intense shortage of supply, brought about by institutional investors rapidly increasing their holdings, stockpiling vast amounts, and depleting the existing pool of available Bitcoins.

As an analyst, I’m observing a significant trend: the rate at which corporations are acquiring each other is outpacing the production from mining operations. This discrepancy has experts concerned about a potential imbalance that could reshape Bitcoin’s role from a volatile asset to a strategic reserve in the future. These predictions suggest massive institutional investments worth trillions of dollars, while long-term holders and governments seem unlikely to offload their Bitcoins.

Due to centralized exchanges running out of resources and increasing regulations, Bitcoin (BTC) might be about to undergo a fundamental shift – one that could potentially restrict access to the most recognized digital currency globally.

2,000 bitcoins a day?

As a researcher delving into the intricacies of the digital currency landscape, I’ve noticed an interesting dynamic between Bitcoin Treasury Company’s daily average purchases (approximately 2,000 units) and the daily production by miners (around 450 units). This discrepancy suggests a significant gap that widens as more institutions become involved in the Bitcoin race. The question of how this affects the future of Bitcoin is still up for debate, but a recent report offers a tantalizing hint.

Guillaume Girard and Will Owens envision that by the close of 2025, institutional investments in Bitcoin could reach a staggering $130 billion. By 2026, this figure is projected to swell to an impressive $300 billion. As per their predictions, institutions will have purchased approximately 4.2 million Bitcoins, making up about 20% of the total supply when accounting for any lost Bitcoins.

As per Bitcoin Treasuries data from May 2025, a total of approximately 3.35 million Bitcoins were stored in the reserves of corporations, states, and other entities. Currently, around 800,000 Bitcoins are being held on corporate balance sheets specifically.

How is Bitcoin getting sold off from the circulation?

As per Michael Saylor, the chairman of the company’s strategy, there are no plans to offload any of the company’s Bitcoins. If other similar entities follow suit and hold onto their Bitcoins, we need to recognize that the supply of Bitcoin is decreasing at an accelerating pace.

With governments and both private and public entities increasingly purchasing bitcoins and not intending to sell them, the number of coins in circulation is steadily decreasing at a faster pace over time.

According to Ki Young Ju, CEO of CryptoQuant, Bitcoin’s annual deflation rate stands at approximately -2.23% primarily due to activities by Strategy. By the first quarter of 2025, corporations are estimated to have purchased approximately 196,000 Bitcoins, while the mined amount is roughly 60,044 Bitcoins. The Bitcoins acquired by long-term holding companies already surpass the total number of Bitcoins projected to be mined in 2025 (164,250 Bitcoins).

With each new Bitcoin treasury emerging, such as those by Nakamoto and 21 Capital, there is a progressive decrease in the liquid supply of Bitcoin. This shift could significantly alter the current market dynamics.

As a researcher delving into the world of cryptocurrency, I’m intrigued by the projections for 2026 that suggest a shift in Bitcoin’s dynamics. It’s predicted that we might witness decreased volatility and an increase in transparency or reserves associated with Bitcoin. Furthermore, the role of Bitcoin could transition from a seized asset to a strategic reserve asset. The growth of Bitcoin-based decentralized finance platforms, often referred to as “BTCfi,” is said to be significant during this period. Lastly, it’s suggested that there will be a drastic reduction in the circulation of Bitcoin, ushering in a new era for this groundbreaking digital currency.

The outcome could heavily hinge on regulatory decisions. Two proposed U.S. bills, the Bitcoin Reserve Act and the Genius Act, have the potential to significantly influence the Bitcoin market. The former proposes that the U.S. should invest in Bitcoin, while the latter aims to regulate stablecoins more stringently, potentially making it simpler for institutions to participate in the crypto market.

Additionally, the enactment of these bills creating state-owned Bitcoin reserves could potentially increase demand for Bitcoin purchases.

Supply shock and possible implications

2025 saw a significant decrease in the amount of Bitcoin held by centralized exchanges. In April specifically, the supply had not been this low since November 2018. This decline represented a loss of around 21% of the total Bitcoin kept on these exchanges’ balances.

It appears that many traders are holding onto their Bitcoins rather than selling them. By May 2025, approximately two-thirds of Bitcoin wallets have remained inactive since the start of the year.

Although some believe that large-scale purchases of bitcoin by institutional investors could drive up its price, others are less convinced.

According to investor and trader Willy Woo, it’s unlikely that a significant increase in institutional buying will significantly impact the price of Bitcoin.

He clarifies that when institutional investors purchase large quantities of Bitcoin, they also engage in similar short sales as a means to balance out their risks.

High demand, shrinking supply

Matt Hougan, a CIO of Bitwise, predicts Bitcoin’s price may reach $200,000 in 2025.

He indicates that the growing demand coupled with a decrease in supply will likely disrupt the four-year cycles, characterized by substantial rises and steep 90% declines.

In summary, the scarcity impact on Bitcoin has already occurred. With growing demand and decreasing supply, the price of Bitcoin could become more consistent or potentially reach new peaks.

It’s simpler to offload Bitcoins at your desired rate; however, reacquiring them could prove more challenging. Bitcoin might reduce its sensitivity to macroeconomic fluctuations and establish itself as a secure refuge and tactical investment.

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2025-05-25 23:06