Demand for spot bitcoin ETFs in the US rose significantly on Tuesday, outpacing new supply created daily by miners by a remarkable 614%, according to Gayatri Chowdhury, quantitative research analyst at Bitwise Asset Management.
Demand from US BTC ETFs exceeds new supply of BTC by 7x pic.twitter.com/OCU5D19rpf
– Gayatri (@GayatriPC_) March 27, 2024
The rise in demand for Bitcoin ETFs reflects the growing interest among institutional and retail investors in gaining exposure to digital assets, without having to manage Bitcoin themselves. ETFs provide a convenient and regulated way for investors to participate in the potential upside of Bitcoin price movements while mitigating some of the risks associated with direct ownership and custody.
The Bitcoin halving, scheduled to take place in less than a month, will reduce the block reward from 6.25 BTC to 3.125 BTC. This event is important because it reduces the rate of creation of new bitcoins by half, making bitcoins rarer over time. As demand for Bitcoin ETFs continues to rise and outstrip new supply, available Bitcoin in the market has become increasingly scarce.
The combination of growing demand for Bitcoin ETFs and the impending Bitcoin halving have been the catalysts for the rise in the price of Bitcoin this year, with the price of Bitcoin now up more than 55% year-to-date at the time of writing. Since BlackRock initially filed its spot application for a Bitcoin ETF with the SEC, BTC has risen more than 173%.
Market participants are still keen to see how Bitcoin will react to the upcoming halving, as this is the first market cycle in Bitcoin history where its price reached a new all-time high before the halving. Historically, it can take a few months for a “supply shock” to start the price of Bitcoin rising after its halving. But now, with demand from Bitcoin ETFs surging with no end in sight, Bitcoin has already seen a major supply shock, and the new supply of BTC daily is about to halve.
