Bitcoin (BTC) supply has become increasingly tight, with exchange balances falling to a five-year low and making the asset primed for a potential “supply shock,” said Matt Weller, global head of research at Forex.com, in an interview with CoinDesk. Television Thursday.
The level of bitcoin available on cryptocurrency exchanges – liquid tokens that investors can easily buy and sell – fell by 2.3 million, its lowest reading since April 2018, data from Glassnode shows. This is down from 2.6 million a year ago and 3.2 million at its peak in May 2020.
Meanwhile, there are about 3 million tokens that haven't been moved in ten years, Weller said. This compares to the current general supply of 19.5 million and Bitcoin's maximum supply of 21 million.
“This suggests a potential supply shock,” Weller said. “With less supply in the market, all it takes is a small increase in demand to really drive up prices at a rapid pace.”
BTC exchange balance and supply last moved over 10 years ago (Matt Weller using data from Glassnode)
BTC exchange balance and supply last moved over 10 years ago (Matt Weller using data from Glassnode)
Weller said spot ETFs, as opposed to futures-based products, could “fundamentally change the supply and demand picture” for bitcoin, making it available to a new set of investors. This is especially true now that bitcoin has regained its “uncorrelated asset” appeal by decoupling from equities and recovering as U.S. stocks enter correction territory, he added.