Bitcoin in the face of limited supply: are price increases inevitable?

The year 2024 brought significant changes to the Bitcoin ecosystem that could fundamentally alter the dynamics of the cryptocurrency market. While the Bitcoin price reached $91.36K with a +1.47% increase over the last 24 hours, analysts’ attention is focused on deep structural changes in the availability of this asset. The possibility of a supply shock in the coming months is generating considerable interest among both individual investors and financial institutions.

Halving 2024 as a Turning Point for Bitcoin Production

The halving process, which took place in 2024, fundamentally changed the economics of Bitcoin mining. This event halved the rewards for miners, directly leading to a reduction in the number of new Bitcoins entering the market. For many small mining operators, the new reward structure proved economically unattractive, resulting in industry exit.

This supply reduction occurs at a time when the total Bitcoin supply remains rigidly capped at 21 million units. A significant portion of this amount is already in circulation, and a substantial percentage is held in long-term investor (HODLers) wallets, lost wallets, or storage. The next halving cycle is scheduled for 2028, but the effects of the current one are already beginning to impact the asset’s availability on the open market.

Explosion of Institutional Demand

Alongside decreasing supply, we observe a dynamic increase in corporate interest. Financial sector giants, including BlackRock, are actively developing Bitcoin-tracking ETF products, opening access to this asset for a broader range of institutional investors. This institutionalization exerts significant upward pressure on the resource, which is inherently limited.

Beyond traditional funds, growing interest in Bitcoin is evident in countries struggling with high inflation and currency instability. Argentina, Turkey, and Nigeria have become new hubs for Bitcoin adoption as an alternative store of value. This trend could further restrict the available trading volume.

Supply Shock as a Potential Market Catalyst

The term supply shock describes a situation where a dramatic reduction in asset availability on the market generates excessive demand relative to supply. In the context of Bitcoin, such a scenario seems increasingly plausible. The combination of halving effects, rising institutional interest, and the deactivation of older wallets creates a potentially explosive mix for prices.

Market analysts indicate that if such a shock indeed occurs, Bitcoin could reach new all-time highs. The last quarter of 2024 already showed signals of price strengthening, which could be a prelude to more significant movements.

Risks and Uncertainties

However, the optimistic scenario is not without dangers. High volatility could lead to deep declines for short-term investors. Additionally, potential regulatory actions could fundamentally change the market’s character and lead to unexpected price corrections.

Long-term Perspective

A potential supply shock in Bitcoin would represent a profound change in the mechanics of the cryptocurrency market. For long-term investors, this scenario could present a significant opportunity, but in the short term, the market may exhibit increasing volatility. Bitcoin remains both an investment asset and a symbol of transformation in the global financial system. The future exchange rate will be determined by the global macroeconomic situation, regulatory approaches, and the fundamental balance of demand and supply forces in the market.