Spot bitcoin ETFs launched in the U.S. in January 2024. Soon thereafter, one of the most discussed issues was the likelihood of demand, due to bitcoin ETF issuers outpacing the mining supply.
At various times over the past 18 months, ETF demand has far exceeded the supply of the digital currency mined. That makes sense because the ETFs debuted after the bitcoin halving. That’s an event that decreases miners’ rewards. Recently, ETF demand is again outstripping supply. That indicates there could be implications for funds such as the CoinShares Valkyrie Bitcoin Fund (BRRR ).
BRRR provides exposure to spot bitcoin prices. These prices, in theory, could/should rise when demand for the cryptocurrency outpaces supply mined. The demand/supply imbalance is the scenario that’s recently been playing out.
Bitcoin ETF Demand Could Lift BRRR, Rivals
Amid a renewed rally by the largest cryptocurrency, advisors and investors are stepping into ETFs like BRRR in a big way. Last week, ETFs such as BRRR bought 18,644 of the digital currency. That’s roughly six times the supply brought to market by miners, according to HODL15 Capital.
Recent hash rate data indicate miners, including those residing in the CoinShares Valkyrie Bitcoin Miners ETF (WGMI ), have been boosting activity in an effort to capitalize on higher prices. Still, there’s only such they can do. And on days when bitcoin ETFs are big buyers, those funds’ needs are likely to be in excess of what miners are extracting.
“Daily production hovers around 450 BTC. Thus, institutions have absorbed the equivalent of more than 40 days of mining. This phenomenon marks a major shift. It shows that investor appetite in the spot market now exceeds the capacity to create new coins,” reported Coin Tribune.
The theme of ETFs gobbling up bitcoin appears durable. As Farside Investors points, funds have been major buyers of bitcoin in recent days. April 30 represented the lone outflow day over the past week. Going back to the middle of last month, finding days in which funds such as BRRR have been net sellers is a nearly impossible task.
For investors attempting to get a handle on what’s next for BRRR and friends in terms of price action, it’s merely a matter of following spot bitcoin prices. That’s because as those figures rise, many ETF holders put more money to work.
“This acceleration coincides with a surge in the bitcoin price. In early May, BTC rose 4% to reach $97,700. However, the price soon fell back to around $94,000. With supply remaining limited, each new demand moves prices. Tension therefore rises between demand and production,” according to Coin Tribune.
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