A potential approval of a spot ETF could bring about significant changes in Bitcoin’s supply and demand dynamics, as professional investors would allocate funds to BTC as an uncorrelated asset, according to Matt Weller, the global head of research at Forex.com. In an interview with CoinDesk TV, he pointed out that Bitcoin’s supply is gradually tightening, with exchange balances hitting a five-year low, setting the stage for a possible supply shock.
Data from Glassnode indicates that the amount of available Bitcoin on cryptocurrency exchanges, representing liquid tokens that can be easily bought and sold, has decreased to 2.3 million. This marks the lowest level since April 2018, down from 2.6 million a year ago and a peak of 3.2 million in May 2020. Additionally, approximately 3 million tokens have not been moved in a decade, compared to the current total supply of 19.5 million and Bitcoin’s maximum supply limit of 21 million.
Weller believes that this situation suggests the possibility of a supply shock. With a reduced supply available on the market, even a small increase in demand can have a significant impact on driving prices higher rapidly.
Weller also noted that spot ETFs, unlike futures-based products, have the potential to fundamentally change the supply and demand dynamics for Bitcoin. These ETFs could make Bitcoin accessible to a new category of investors, especially considering that Bitcoin has regained its status as an uncorrelated asset, having decoupled from equities and showing strength as U.S. stocks entered correction territory.
According to Weller, even a modest allocation from major funds based on the investment thesis of an uncorrelated or occasionally uncorrelated asset could be a strong bullish signal for Bitcoin and the entire cryptocurrency market.
