Imagine that the amount of Bitcoins mined by miners is a limited resource that is becoming increasingly scarce. Now imagine that large players, such as issuers of ETFs (exchange-traded funds), are buying up this resource so quickly that they are 20 times faster than the pace of its creation. This is exactly what is happening in the bitcoin market right now, and it can significantly affect the future of the cryptocurrency. Let's figure out what this means.
What happened?
Recent data shows that Bitcoin ETF issuers such as BlackRock and other large funds have purchased over 9,600 BTC in one day. For comparison, miners mine about 450 BTC daily. It turns out that these funds take more bitcoins out of circulation than the market manages to produce.
This is not the first time: funds regularly purchase huge amounts of cryptocurrencies. For example, in October, their purchases were five times higher than the total production, and now this figure has increased by more than 20 times.
Why is this important?
Bitcoin Shortage
Bitcoin has a limited supply — only 21 million coins. The more large players such as ETFs take over BTC, the fewer of them remain in the free market. This can lead to higher prices in the long run due to the simple law of supply and demand.
Threats to decentralization
Bitcoin was created as a decentralized network where no single organization could dominate. But now funds already control about 5% of the total supply, which is more than the assets of Satoshi Nakamoto, the creator of bitcoin. This raises concerns that such large players may gain too much power over the market.
Impact on miners
If funds continue to buy back BTC in such volumes, it becomes more difficult for miners to compete. Their mining is losing importance against the background of huge buying pressure from funds.
What do the experts say?
Analysts note that the current situation may have an irreversible impact on the market. Sean Edmondson, one of the analysts, even jokes.:
"Buy Bitcoin while you still can."
Other experts, such as Eric Balcunas, warn that if the pace of purchases continues, funds could gain control over a significant portion of the bitcoin supply, undermining its decentralized nature.
How will this affect the market?
Short-term volatility
Despite the huge purchases, the market remains unstable. For example, recently one of the largest ETFs, IBIT— recorded an outflow of funds of 330 million dollars, which became a record.
Long-term price growth
If the shortage of BTC in the market continues, it could push the price up, especially if interest from institutional investors persists.
Growing community concerns
Many members of the crypto community are already expressing concern about the impact of players such as BlackRock on the decentralization of bitcoin. This is causing debate about the future of cryptocurrency governance.
Bottom line: what should ordinary investors do?
If you are holding or planning to buy bitcoin, it is important to understand that the market is becoming more and more "institutional". This can be both a plus (rising prices due to scarcity) and a minus (loss of decentralization). For long-term investors, this situation can create opportunities, but it is important to be prepared for volatility and monitor the actions of large funds.
