With the crypto landscape evolving, there seems to be a significant tightening in the available supply of bitcoin on exchanges, with the possibility of just nine months of reserves remaining.
The latest halving report from Bybit reveals the reasons behind this supply tightening, pointing towards a looming scarcity that could end up reshaping the market dynamics.
The halving analysis
The halving analysis from Bybit shows that the shrinking reserves of Bitcoin (BTC) on exchanges is mostly due to higher investor retention and a fall in mining outputs after the recent halving event.
Once the halving comes to pass, it would effectively reduce the reward for mining bitcoins by half, which would reduce the rate at which new bitcoins are added to the market supply.
Historically, this event has resulted in a supply squeeze, which is further intensified by rising investor inclination to hold onto their assets for a longer time frame.
There has been a steady increase in institutional interest in Bitcoin, especially with the launch of spot Bitcoin exchange traded funds (ETFs) in the United States.
The report from Bybit reveals that institutions are increasingly regarding Bitcoin as a safe haven asset, which has resulted in a significant increase in allocations from both traditional and crypto-native financial entities.
Not only are these investors purchasing bitcoin, but are also holding them, which results in a reduction in the active supply found on exchanges.
The reserves
All centralized exchanges have seen their bitcoin reserves deplete faster. Bybit researchers have calculated that there are just nine months’ worth of Bitcoin reserves left for consumption.
They said in the study that there are only 2 million Bitcoin left to be mined and spot Bitcoin ETFs are recording a daily inflow of about $500 million on average.
This means that about 7,142 bitcoin tokens would leave daily from exchange reserves and within nine months, the reserves would be empty.
Therefore, it is unsurprising that the price of bitcoin would continue its climb before the halving event, or even after, as the supply crunch is likely to push up the price to reach a new record.
Investor behavior
Another shift that was highlighted in the report was in investor behavior, as there has been an increase in the amount of BTC held in cold storage.
The practice of keeping crypto assets offline is not only for boosting security but also for reducing the possibility of selling, which contributes to the shortage in supply.
Data from Bybit suggests that the bullish outlook of the market has encouraged such behavior, as people want to maximize their returns in anticipation of further price increases.
As per speculation, there could be a further tightening in the BTC supply in the market if the current trends continue.
This could drive up the price further, as demand would continue to outpace the dwindling supply of the pioneer cryptocurrency.
The analysis of past market behaviors also supports this scenario, as the conditions were similar, and there were significant price increases.