Following the recent halving event, Bitcoin (BTC) has undergone a pivotal transformation in its supply mechanism. Analysis from the cryptocurrency exchange Bitfinex projects that the demand for Bitcoin could soon be five times greater than its available supply. This shift occurred when the reward for mining a block of Bitcoin was reduced from 6.25 BTC to 3.125 BTC, effectively slashing the daily increase in supply by half.
The Impact of Halving on Supply
As a result of the halving, the notional value of new Bitcoin entering the market each day is expected to fall to $30 million. This is a substantial reduction compared to the influx of new coins prior to the event. Bitfinex analysts have noted that, considering both active and dormant supplies as well as miner selling, the daily issuance could decrease further, particularly as smaller mining operations become less profitable and potentially cease.
Comparing Inflows: ETFs versus New Supply
The average daily net inflows from spot Bitcoin ETFs in the U.S. significantly overshadow the new supply, with more than $150 million entering through these funds, despite recent fluctuations. This discrepancy highlights the increasing investor appetite for Bitcoin, facilitated in part by the availability of several spot-based ETFs since January 11, which allow investors to gain exposure to Bitcoin without direct ownership.
Miner Behavior and Market Response
In anticipation of reduced earnings from mining, Bitcoin miners had decreased their holdings significantly in the six months leading up to the halving. This was likely in an effort to finance necessary upgrades to their mining infrastructure to remain viable post-halving. According to data from Glassnode, the amount of Bitcoin held in miners’ wallets decreased by over 18,000 BTC, reflecting these preparations.
Increasing Direct Custody of Bitcoin
The market is witnessing a growing trend of investors taking direct custody of their Bitcoin, moving it away from exchanges and into more secure storage solutions like cold wallets. This movement is supported by recent on-chain data showing a surge in Bitcoin exchange outflows, reaching levels not seen since January 2023. The shift towards personal custody is seen as a protective measure by investors expecting potential price increases.
