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Demand For Bitcoin to Outpace Supply by 5x, Says Crypto Exchange Bitfinex
- The recent Bitcoin halving reduced miner rewards while slashing daily new supply well below the US$150 million demand from US spot ETFs.
- Indicators suggest high expectations for price rises, even amidst ongoing sales by long-term holders.
- Fidelity Digital Assets revised Bitcoin’s outlook from positive to neutral, citing sell pressure from profitable addresses.
The recent halving of Bitcoin mining rewards has drastically reduced the daily addition of new coins to the market, potentially increasing the demand to five times the supply, a report by exchange Bitfinex said.
Related: CryptoQuant Analysts Say New Bitcoin Whales Outbid Old Whales
Following the halving, the reward for miners dropped from 6.25 BTC to 3.125 BTC per block, reducing the new daily Bitcoin supply to around US$30 million (AU$46 million), significantly below the daily demand from US spot ETFs, which averages over US$150 million (AU$230 million).
In the report, Bitfinex analysts noted an uptick in direct custody by investors, further constraining supply, while exchange outflows suggest a significant move of Bitcoin to cold storage, reflecting investor anticipation of price increases.
Even though long-term holders are actively selling, the market has not experienced the usual pre-halving price dip, suggesting continuing interest from new participants.
With the daily issuance rate declining post-halving, we estimate that the new supply added to the market (new BTC mined) would amount to approximately $40-$50 million in USD-notional terms based on issuance trends.
Bitfinex Bitcoin’s appeal is largely due to the predictability and immutability of its supply, capped by its protocol at 21 million coins to be reached by 2140. The protocol guarantees this supply certainty, which can only be altered by a consensus-reaching protocol change, Bitfinex said. The halving events further enhance Bitcoin’s scarcity by gradually reducing the new supply of coins.
It is expected that this could possibly drop over time to $30 million per day, including active and dormant supply as well as miner selling, especially as smaller miner operations are forced to shut down shop. The average daily net inflows from spot Bitcoin ETFs dwarf that number at over $150 million, even though flows have moderated and even turned net negative over recent weeks.
Bitfinex Fidelity: ‘Bitcoin No Longer Cheap’
Meanwhile, Fidelity Digital Assets has downgraded its medium-term outlook on Bitcoin from ‘positive’ to ‘neutral’. This change follows Q1 observations indicating Bitcoin is no longer ‘cheap’ due to a lack of undervalued days, as determined by the Bitcoin Yardstick, akin to a price-to-earnings ratio.
Additionally, increased sell pressure from long-term holders and the fact that 99% of Bitcoin addresses are in profit, potentially motivating selling, have contributed to this revised neutral stance.
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Overall, while the short-term looks good for Bitcoin, Fidelity Digital Assets believe the medium- and long-term outlook is more subdued.
Author
Aaron Feuerstein
Aaron Feuerstein is a freelance writer based in Melbourne. His focus is on decentralised finance and the regulatory space surrounding blockchain. He holds a Master's in Accounting. When he is not studying the latest legal case, he enjoys his time as a modest but eager hobby cook.
