Bybit, recognized as one of the top three cryptocurrency exchanges globally in terms of trading volume, has recently published a comprehensive report highlighting the future supply constraints of Bitcoin.
The analysis points out that the availability of Bitcoin on exchanges could be significantly reduced in the next nine months due to the anticipated Bitcoin halving event, which will cut the supply generation by 50%.
The report elaborates on the effects of the Bitcoin halving, emphasizing that it could lead to a more pronounced scarcity of Bitcoin in the market. According to the data, all centralized exchanges are witnessing a rapid decrease in Bitcoin reserves.“Bitcoin reserves in all centralized exchanges have been depleting faster,” the report says. “With only 2 million bitcoins left, if we assume a daily inflow of $500 million to Bitcoin Spot ETFs, the equivalent of around 7,142 bitcoins will leave exchange reserves daily, suggesting that it will only take nine months to consume all of the remaining reserves.”
The scarcity of Bitcoin is expected to increase dramatically post-halving. The report uses, “The Stock-to-Flow (S2F) ratio is calculated by dividing the circulating supply of a commodity by its annual production, yielding a gauge of scarcity”.
“Bitcoin’s S2F ratio is around 56 before the upcoming halving, while gold is 60. After the halving in April 2024, Bitcoin’s S2F ratio is projected to double to 112.”
Institutional investors, cognizant of these developments, have already begun to position themselves strategically for the halving event. This proactive approach was particularly noticeable following the U.S. approval of Bitcoin Spot ETFs. “Bitcoin is becoming the safest investment choice even for the most sophisticated investors in the crypto field,” the report says. “The price correlation between Bitcoin and the rest of cryptocurrency has been consistently high, and investment in Bitcoin has also been regarded as the cryptocurrency with the lowest beta.”
This evolving dynamic in Bitcoin’s supply and its implications for market scarcity are critical for investors and market watchers alike. As Bitcoin becomes increasingly scarce, its appeal as a ‘digital gold’ is likely to grow, potentially influencing its valuation and investment strategy across the cryptocurrency landscape. The findings of Bybit’s report serve as a vital indicator for both current and prospective investors, suggesting that strategic adjustments may be necessary to accommodate the changing supply dynamics in the near future.
“Each Bitcoin halving sharpens the narrative of Bitcoin as not just a currency, but a scarce digital asset, akin to digital gold,” stated Ben Joe, Co-Founder and CEO of Bybit. “This upcoming halving in 2024 will thrust Bitcoin into an era of unprecedented scarcity, making it twice as rare as gold.”
