Report: BTC exchanges may see supply shortages 9 months after halving

Author: cryptoslate; Compiler: Blockchain Knight

A recent analysis report from Crypto asset exchange Bybit shows that if user demand for BTC remains at the same level, there may be a shortage of BTC on the exchange by the end of 2024.

The report predicts that if the current withdrawal rate continues (currently about 7,000 BTC per day), then the BTC reserves may be completely exhausted within the next nine months.

The shortage prediction is closely related to the BTC halving event in 2024, which will reduce the BTC output of each block by half.

Alex Greene, senior analyst at Blockchain Insights, said: "The rapid consumption of BTC reserves is reminding the market to prepare for a possible liquidity crisis."

"As reserves decrease, the market's ability to absorb large sell orders without affecting prices will weaken."

According to Bybit's report, after US regulators recently approved a spot BTC ETF, institutional investors significantly increased their BTC investment, driving the growth of BTC demand against the backdrop of reduced supply.

Greene noted: "The surge in institutional interest has significantly increased demand for BTC. This increase could exacerbate the phenomenon of BTC shortages and push up prices after the halving."

The new nine ETFs are buying BTC at a rate of about $500 million per day, which is equivalent to withdrawing about 7,142 BTC from exchange reserves every day.

At the same time, there are only about 2 million BTC left in the reserves of centralized exchanges.

Bybit warned that if demand remains high after the daily mining supply is halved to 450 BTC, exchange supply may disappear by early next year.

The next halving will reduce the mining reward per block from 6.25 BTC to 3.125 BTC, further limiting the new BTC supply entering the market.

This programmed reduction simulates scarcity of resources, similar to the scarcity of precious metals, and is designed to control inflation and increase the value of BTC.

Miners will face reduced rewards and higher production costs, which will likely reduce the frequency of BTC being sold immediately after it is generated.

The reduction in miner sales will lead to scarcity of BTC on public exchanges, further pushing up prices.

Crypto asset market strategist Maria Xu said: "Miners are adapting to increased costs and reduced rewards."

"Many miners may sell part of their reserves before the halving to maintain operations, which may temporarily increase the BTC supply, but the long-term decline in supply after the halving is certain."

Bybit's analysis shows that the tightening of BTC supply is a critical and urgent issue with significant implications for BTC pricing and investment strategies.

However, the exchange remains optimistic about the coming months and believes that the decline in supply may exacerbate the "fear of missing out" (FOMO) among new investors, which may drive the price of BTC to unprecedented levels.