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Crypto Potato 2025-01-10 07:32:18

Bitcoin (BTC) Supply Shock Unlikely in 2025: Here’s Why

With Bitcoin’s increasing presence in traditional financial systems and speculation around a US BTC strategic reserve, some experts foresee a major supply shock during this cycle, potentially disrupting the 4-year cycle theory with extraordinary price growth. However, a new report indicates that such a supply shock is unlikely to happen in 2025. Analyzing Bitcoin Long-Term Holder (LTH) Supply While Bitcoin’s halving, rising institutional interest, and the introduction of spot BTC ETFs in the US have amplified discussions of constrained supply, detailed data suggests otherwise, according to a report by CEX.IO, shared with CryptoPotato . The combination of long-term holder (LTH) activity, ETF activity, and evolving liquidity trends indicates a strong supply ecosystem that is capable of mitigating potential shocks. Key to this assessment is the behavior of LTH supply post-halving. Historically, halving events trigger a notable transition of coins from LTH to short-term holders (STH), thereby increasing market liquidity. In 2024 alone, LTH supply dominance fell by 9%, releasing 1.58 million BTC into the market. With an average 16% decline in LTH dominance observed during previous post-halving cycles, a projected transfer of 1.4 million BTC from LTH to STH is expected in 2025. The report explained that this ensures that increased demand from institutions or governments will likely be met by substantial LTH profit-taking, tempering supply constraints. ETF Dynamics, OTC Activity, and Market Liquidity ETF activity, often cited as a potential driver of supply shocks, also appears less impactful upon closer examination. Despite US spot Bitcoin ETFs amassing over 1.13 million BTC in 2024, much of this accumulation stemmed from cash-and-carry trades rather than direct directional investments. These arbitrage strategies, which are reliant on derivatives like CME futures, balance supply and demand without directly pressuring spot markets. Additionally, ETFs currently account for less than 4% of Bitcoin’s total trading volume, which further reduces their capacity to drive a systemic supply imbalance. Market liquidity and exchange reserves also play crucial roles, as detailed by CEX.IO. While exchange-held Bitcoin reserves dropped to record lows in 2024, withdrawals largely signaled transfers to cold storage rather than liquidation, which reflected long-term confidence. Simultaneously, OTC platforms increased their holdings by over 200,000 BTC, which points to a redistribution of liquidity rather than outright depletion. This diversification, coupled with stable daily transfer volumes, indicates a balanced and active market. Finally, market depth metrics reveal improving liquidity conditions. The growing resilience is depicted by the rise in USD-denominated liquidity by 61% in 2024 despite reduced BTC-denominated depth. With larger exchanges consolidating market share and US platforms expanding dominance, the liquidity landscape appears to be well-positioned to handle increased demand in 2025. Together, these factors reinforce the conclusion that Bitcoin’s supply remains strong, making a significant supply shock unlikely in the coming year. Instead, the report states that the market is poised for measured growth within the established 4-year cycle framework. The post Bitcoin (BTC) Supply Shock Unlikely in 2025: Here’s Why appeared first on CryptoPotato .

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