Favorable Supply/Demand Dynamics Supporting Bitcoin, Spot ETFs

One of the widely cited catalysts pertaining to bitcoin is supply. Only 21 million of the digital coins can be mined. And thanks to quadrennial halvings, the next of which is slated for April, it gets harder to mine the cryptocurrency.

By some estimates, it could take more than a century for all bitcoins to be issued. It could be slightly longer or shorter, but the supply of bitcoin has a hard cap on it. That’s a longer-ranging supply/demand dynamic. But more recently, the largest cryptocurrency is benefiting from near-term supply/demand factors.

Notably, the spot bitcoin ETFs that debuted in the U.S. in January are actively gobbling up bitcoin. By some estimates, those ETFs are buying 3,500-4,300 bitcoins per day because investors are flocking to those funds.

Bitcoin ETFs Making Big Difference in Supply

In plain English, due to inflows into their ETFs, issuers of U.S.-listed spot bitcoin ETFs have been regularly buying more bitcoin than is created on a daily basis. As David Hollerith of Yahoo Finance reports, the average number of bitcoins created in a day is 900.

Using the aforementioned 3,500-4,300 estimate, it’s clear that issuers of spot bitcoin ETFs are, in an average day, buying close to or more than quadruple the supply being created. On some days, their buying activity is close to 5x the number of new bitcoins issued. There are also other supply factors to consider.

“The US government currently holds 215,000 BTC, according to blockchain analytics platform Arkham Intelligence, a stash that includes confiscations in various seizures such as from the 2016 hack of crypto exchange Bitfinex,” reported Hollerith.

That doesn’t even account for bitcoins lost forever because some users forgot passwords to digital wallets. That figure is estimated to be thousands of coins worth hundreds of millions of dollars.

Of course, Uncle Sam could eventually sell some of his bitcoin holdings. And ETF issuer almost certainly will, as some investors look to lock in profits. But the point is supply/demand scenarios are currently helping bitcoin. That could be the case again over the long term.

Some of the well-known spot bitcoin ETFs trading in the U.S. include the VanEck Bitcoin ETF Trust (HODL), Invesco Galaxy Bitcoin ETF (BTCO), WisdomTree Bitcoin Fund (BTCW), Bitwise Bitcoin ETF (BITB), Grayscale Bitcoin Trust ETF (GBTC)iShares Bitcoin Trust (IBIT)Fidelity Wise Origin Bitcoin Fund (FBTC), and the ARK 21Shares Bitcoin ETF (ARKB).

For more news, information, and analysis, visit the Crypto Channel.