Since the birth of bitcoin in January 2009, it’s been known that the maximum supply of the dominant digital currency will be 21 million. That’s it. No more. Total circulating supply is currently 19.88 million. And the last bitcoin won’t be mined until the year 2140. So no one alive today needs to worry about that.
However, in a theme that could benefit ETFs such as the Coinshares Valkyrie Bitcoin Fund (BRRR ), bitcoin’s supply constraints are increasingly a topic of conversation. For example, Michael Saylor’s Strategy (MSTR), the largest corporate holder of the cryptocurrency, announced on Monday it’s buying another $26 million worth of the largest cryptocurrency. That’s the company’s second-smallest purchase in recent months.
While bitcoin’s supply limit is widely known, the diminutive-by-comparison purchase by Strategy stoked that a supply shock could soon arrive. That event would likely push bitcoin prices higher.
Credibility in Supply Shock Chatter
Financial markets, particularly the cyrptocurrency space, are known to be conducive to generating rumors and mania-like conjecture. But there’s credibility in the recent chatter regarding a potential bitcoin supply shock.
For example, data indicates about 70% of bitcoin’s circulating supply isn’t circulating at all. Rather, it’s being held, in various forms, by investors who are taking a long-term view of the digital asset. ETFs such as BRRR have broadened the spectrum of bitcoin investors, enabling many to enter the arena in buy-and-hold fashion.
As a result, ETFs such as BRRR are gobbling up supply. In fact, miners, including those residing in the CoinShares Valkyrie Bitcoin Miners ETF (WGMI ), usually mine far less bitcoin than is consumed by spot ETFs. In recent months, that scenario has played out on almost daily basis. Currently, several ETF issuers are among the largest holders of the digital currency. And as CoinTelegraph reports, the top 100 wallet addresses in the world control 15% of supply. That level of concentration isn’t going unnoticed. And some believe it could be a contributing factor is a supply shock materializes.
“Critics warn that this creates Bitcoin ownership concentration, where power is consolidated in a small group of hands, challenging the original ethos of decentralization,” according to CoinTelegraph. “The wealthiest entities now control a significant slice of Bitcoin: Addresses holding 10,000 BTC account for 14% of all coins, raising questions about concentration vs. confidence. Others argue it shows confidence: These whales aren’t flipping BTC for quick profit; they’re holding for the long game.”
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