Bitcoin's Supply Crunch: A Pre-Halving Analysis

Ahead of the fourth halving, expected around 23 April 2024, the article looked at signs of a tightening bitcoin supply. Drawing on Glassnode analysis, it noted that only 5 to 10% of the circulating supply was actively traded and that coins had been moving from exchanges to illiquid wallets since March 2020. Illiquid supply was growing at 2.2 times the rate of new issuance, and available supply was at an all-time low.

Because miners had historically sold most of their bitcoin to cover costs, the halving was expected to reduce the supply reaching the market further. The article contrasts bitcoin’s falling issuance with central banks’ use of quantitative tightening to control inflation, suggesting that any return to monetary expansion could widen the gap. With approval of a spot bitcoin ETF then seen as imminent, it expected upward pressure on the price, as in previous halving cycles.