Key Takeaways:
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The rate at which Bitcoin is held for over a decade is outpacing new Bitcoin mining, with 550 BTC entering this category daily compared to 450 BTC generated.
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Currently, 17% of Bitcoin is classified as illiquid, with estimates suggesting this figure may rise to 30% by 2026.
Fidelity Digital Assets has published a report that indicates a significant change in Bitcoin’s supply after the anticipated 2024 halving. It highlights that the “ancient” Bitcoin, which refers to coins held for ten years or longer, is increasing at a rate of 550 BTC per day, surpassing the 450 BTC that are newly issued.
This rising trend, coupled with continuous purchases by institutional investors, raises an intriguing question: Could this heightened demand push Bitcoin’s price to $1 million?
The Intersection of Bitcoin Accumulation and Scarcity
Currently, the ancient supply of Bitcoin accounts for more than 17% of all BTC issued (approximately 3.4 million BTC valued at $360 billion at a price of $107,000/BTC). This indicates strong conviction among holders, with daily sell-offs occurring in less than 3% of instances. Projections suggest that this share could rise to 20% by 2028 and 25% by 2034, thereby constricting the available supply.
Concurrently, institutional investments in Bitcoin are accelerating. According to Bitwise, projected inflows could reach $120 billion by 2025 and climb to $300 billion by 2026 in a base case scenario. These inflows could stem from various sources, including nation-states reallocating a portion of their gold reserves and public companies increasing their holdings.
Bitcoin’s Journey to $1 Million: A Supply-Demand Argument
To hit the $1 million mark per Bitcoin, the market capitalization would need to soar to $21 trillion, up from the current $2.10 trillion, with nearly 19.9 million BTC already mined. The limited supply and increasing illiquidity could pave the way for this price milestone. Historical trends following halving events (in 2013, 2017, and 2021) showed that reduced supply growth paired with rising demand led to significant price rallies.
While 17% of Bitcoin’s supply is currently categorized as illiquid, this percentage is expected to increase. If institutional buying continues at its current rate, 30% of the total supply could become illiquid by 2026, representing about 6.3 million BTC.
Nonetheless, certain challenges remain, particularly the potential volatility after significant events like the 2024 U.S. election. Evidence shows that even long-term holders may sell during periods of market instability, which could counteract the trend of increasing illiquidity.
Bitwise has pointed out that a substantial $35 billion remains on the sidelines for 2024, suggesting robust demand potential. Despite the hurdles, the combination of Bitcoin’s ancient supply and anticipated institutional investment paints a picture of growing scarcity, making the $1 million target appear increasingly viable.
Related: Norwegian crypto firm K33 raising more funds to buy up to 1,000 BTC
This article does not provide investment advice. All investment and trading activities involve risks, and readers should do their own research before making decisions.
