Bitcoin could face a supply shortage within the next nine months due to intense buying pressure and the upcoming halving event, according to the latest report issued by cryptocurrency exchange Bybit.
The report highlights that the remaining Bitcoin reserves on exchanges are dwindling quickly, with only around 2 million Bitcoins left.
According to Bybit's analysis, if the daily inflow of $500 million continues to Bitcoin Spot ETFs, roughly 7,142 bitcoins are expected to be withdrawn from exchanges each day. This trend suggests that all remaining exchange reserves could be exhausted in just nine months.
The upcoming Bitcoin halving, scheduled for April 2024, will further exacerbate the supply constraints by reducing the mining reward by half, thus making Bitcoin twice as scarce as gold. The report cites the Stock-to-Flow (S2F) model, which measures the scarcity of a commodity. Currently, Bitcoin’s S2F ratio is around 56, close to gold's ratio of 60. Post-halving, Bitcoin's S2F ratio is expected to double to 112, the report says.
Institutional investors have been particularly active, with reports indicating massive allocations to Bitcoin in the months leading up to the halving. The report also notes a strong price correlation between Bitcoin and other cryptocurrencies, with Bitcoin often considered the crypto asset with the lowest risk.
Deep-pocket investor investors often adopt a "sell the news" strategy, accumulating positions before an event like a halving and selling afterward. However, the approval of new products like Spot ETFs means some institutions are still in the process of gaining exposure, restricted by investment mandates that limit engagement with newly launched products.
“Each Bitcoin halving sharpens the narrative of Bitcoin as not just a currency, but a scarce digital asset, akin to digital gold. This upcoming halving in 2024 will thrust Bitcoin into an era of unprecedented scarcity, making it twice as rare as gold," said Ben Joe, Co-Founder and CEO of Bybit.
Bitcoin halving is a critical event for the flagship cryptocurrency, occurring every 210,000 blocks—roughly every four years—which halves the reward for mining Bitcoin. This mechanism is designed to control the release of new bitcoins and curb inflation.
The network's fixed supply is capped at 21 million units, with the most recent halving in May 2020 reducing the mining reward from 12.5 to 6.25 bitcoins per block. The next halving will decrease the reward to 3.125 bitcoins per block.