The recent analysis conducted by Bybit has brought to light a concerning issue in the world of cryptocurrency – a potential shortage of Bitcoin on exchanges by the end of 2024. The report indicates that if demand continues at its current pace, reserves could be completely depleted within the next nine months, with withdrawal rates sitting at around 7000 BTC per day. This shortage forecast is closely linked to the anticipated halving event in 2024, which will cut Bitcoin production on each block by half.
Senior analyst, Alex Greene, from Blockchain Insights, has warned that the rapid depletion of Bitcoin reserves could lead to a liquidity crisis in the market. As reserves dwindle, the market’s ability to absorb large sell orders without affecting the price weakens. This could have significant implications for investors and traders who rely on liquidity to execute their trades smoothly.
The surge in institutional interest in Bitcoin has been one of the driving factors behind the increased demand for the cryptocurrency. This heightened demand is likely to exacerbate the shortage and push prices higher after the halving event. Institutional investors, such as the Newborn Nine ETFs, have been buying Bitcoin at a rate of approximately $500 million per day, resulting in a withdrawal rate of around 7,142 BTC per day from exchange reserves.
With only about 2 million BTC remaining in centralized exchange reserves, Bybit has warned that these supplies could vanish by early next year if demand remains high post-halving. The halving event will reduce the daily mining supply to 450 BTC, cutting the mining reward from 6.25 to 3.125 bitcoins per block. This reduction aims to mimic resource scarcity, similar to precious metals, and control inflation while increasing Bitcoin’s value.
Miners are expected to adjust to higher costs and reduced rewards post-halving. While some miners may sell part of their reserves to sustain operations before the halving, there is likely to be a long-term decline in supply afterward. This reduction in miner sales will contribute to the scarcity of Bitcoin on public exchanges, potentially driving prices even higher in the future.
Bybit’s analysis highlights the immediate concern surrounding the tightening of Bitcoin supply and its significant implications for pricing and investment strategies. The exchange, however, remains cautiously optimistic about the situation, suggesting that the fall in supply could trigger a “fear of missing out” among new investors – potentially propelling Bitcoin’s price to unprecedented levels in the future.
The looming Bitcoin shortage paints a precarious picture for the cryptocurrency market. With demand soaring and supply dwindling, investors and traders will need to carefully navigate the evolving landscape to capitalize on potential opportunities while mitigating risks associated with liquidity and scarcity.