“Bitcoin’s trajectory might witness a ‘supply shock’ as the number of available tokens dwindles, creating a captivating scenario for investors, suggests an analyst.”
The world’s largest cryptocurrency, Bitcoin, may be facing a shortage of available supply. The number of bitcoin tokens available to buy and sell on crypto exchanges has dropped to its lowest level in five years, standing at 2.3 million. This decrease in available supply could potentially lead to a supply shock, especially with the potential approval of a spot bitcoin ETF on the horizon.
Matt Weller, the Global Head of Research at Forex.com, believes that the current lack of actively liquid bitcoin in the market could contribute to a potential supply shock. He suggests that there is not much bitcoin available for trade, which could drive up demand and subsequently the price.
The shortage of available supply could lead to another price spike for bitcoin. Just this week, bitcoin reached $35,000, the highest level since May 2022, driven by optimism surrounding the potential approval of a spot bitcoin ETF. If approved, this ETF would further increase demand for bitcoin, exacerbating the already limited supply.
One contributing factor to the constrained supply is that many bitcoin tokens are held by long-term investors who have not traded their holdings in years. It is estimated that around 3 million bitcoin tokens have not been traded in the past 10 years. However, if the price of bitcoin continues to rise, some of these investors may be motivated to sell, relieving some of the supply pressure.
It is important to note that the supply of bitcoin is finite, with a cap of 21 million tokens. Currently, there are approximately 19.5 million tokens in circulation. As the supply becomes increasingly limited, any increase in demand can have a significant impact on the price.
Overall, the low supply of available bitcoin tokens on crypto exchanges could potentially lead to a supply shock and further price increases. The approval of a spot bitcoin ETF would only intensify the demand for bitcoin, making the supply shortage even more pronounced. Investors should closely monitor these developments and consider the potential impact on the cryptocurrency market.