Cryptocurrency purchasing surge on Wall Street causes acute scarcity in Bitcoin supply
In the world of cryptocurrency, Bitcoin continues to captivate the financial industry with its limited supply of 21 million coins. This structural scarcity is creating a dynamic that supports price appreciation, particularly as demand grows from institutional investors.
Key Impacts
Supply Constraints Amid Growing Demand
Institutional adoption of Bitcoin through Exchange-Traded Funds (ETFs) has surged in 2025, with cumulative inflows exceeding $14.8 billion. This influx has absorbed most newly mined Bitcoin, leading to a supply squeeze where limited new issuance cannot keep pace with buying interest. Monthly ETF inflows have even consistently outpaced Bitcoin’s production rate, underlining this scarcity.
Price Sensitivity to Liquidity and Macro Factors
While the supply is capped, liquidity conditions also play a crucial role in Bitcoin’s market performance. Historically, contractions in money supply (M2) have coincided with price declines due to reduced risk-on demand, indicating that Bitcoin’s price is affected both by scarcity and broader financial market liquidity.
Inflation Hedge Appeal
Bitcoin's fixed supply and decentralized nature make it immune to inflationary dilution like fiat currencies. This attribute makes it attractive as a hedge against purchasing power erosion during periods of expanded money supply or monetary stimulus.
Volatility and Regulatory Risks
Despite the supply constraints driving potential price growth, Bitcoin remains prone to sharp corrections triggered by regulatory uncertainty or shifts in speculative sentiment. Sudden government actions or high leverage can cause rapid sell-offs even when underlying scarcity remains.
Institutions Dominating the Market
Institutional investors have purchased over 545,000 BTC year-to-date, significantly exceeding the 97,000 BTC mined so far. Companies like BlackRock and MicroStrategy are among the leading institutional buyers of Bitcoin. Retail investors are also actively participating, with small wallets (<100 BTC) absorbing 17K BTC monthly, outpacing the 13,850 BTC created by miners during the same period.
Long-Term Holders and Exchange Reserves
Over half of all Bitcoin is held by long-term holders who do not plan to sell, even at high prices. This trend contributes to the rising price of Bitcoin, as does the depletion of exchange reserves, which are at decade lows.
The Bitcoin Supply Shock
Analyst Lark Davis believes the Bitcoin supply shock has already started, with the demand for Bitcoin being 5.6 times higher than the new supply, creating an imbalance in the market. Even governments have started buying and holding Bitcoin, indicating it is now being viewed as a reliable long-term asset.
Future Predictions
Tom Lee, Fundstrat co-founder, predicts that Bitcoin could hit $250,000 by 2025. Samson Mow, CEO of JAN3, stated that there's not enough Bitcoin for everyone due to the intense buying pressure from institutions. Over time, Lee suggests that Bitcoin could even hit $1 million, driven by its scarcity, global adoption, and influence of whales and institutional investors.
In conclusion, Bitcoin’s limited supply fundamentally fosters scarcity that supports price increases as demand grows, especially from institutional investors. However, its price also remains sensitive to macro liquidity conditions, regulatory developments, and market speculation, which can cause volatility amid the structural supply-demand dynamics.
Trading in Bitcoin options has increased significantly due to its limited supply, enhancing the appeal for investors seeking instruments to hedge against price volatility or speculate on future movements. Given the growing demand from institutional investors and depleting exchange reserves, finance experts predict that Bitcoin's price could reach unprecedented levels, with Tom Lee projecting it to reach $250,000 by 2025.
The increasing influx of institutional investments in Bitcoin and the consistent monthly ETF inflows have outpaced the production rate, creating a supply squeeze that may push the value of Bitcoin towards the investment portfolios of finance-focused individuals, further fuelling the trend of investing in Bitcoin.
