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The world’s largest cryptocurrency may be at risk of a supply shock as demand from United States (US) Spot Bitcoin Exchange Traded Funds (ETFs) has surged far beyond expectations. In December 2024, the volume of BTC acquired through Spot Bitcoin ETFs more than tripled the amount mined during that same month, underscoring the severe imbalance between supply and demand.
Spot Bitcoin ETFs Trigger Supply Shock Risks
In December 2024, US Spot Bitcoin ETFs purchased an astonishing 51,500 BTC. On the other hand, BTC miners produced only 13,850 coins during the same period, according to data from Blockchain.com. This indicates that Bitcoin ETFs alone purchased nearly four times the amount BTC miners generated and supplied to the market that month.
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According to reports, the demand for ETFs in December was nothing short of extraordinary, exceeding the available supply by approximately 272%. This massive increase in demand for Spot Bitcoin ETFs has raised concerns about a potential BTC supply shock, with analysts suggesting that it could happen soon.
Specifically, Lark Davis, a crypto analyst, announced earlier in December that “a massive supply shock is imminent.” The analyst based this alarming forecast on the significant accumulation of BTC from US Spot Bitcoin ETFs. Davis disclosed that at some point in December, BTC ETFs had bought 21,423 BTC; meanwhile, miners had produced only 3,150 BTC around the same time.
The analyst also noted that BTC ETFs globally held approximately 1,311,579 BTC as of December 17, 2024. This amount, valued at $139 billion, accounts for 6.24% of BTC’s total supply of 19.8 million. Given this staggering figure, Davis projects that during peak bull market phases, Spot Bitcoin ETFs could hold 10-20% of BTC’s total supply, raising more concerns about a major supply shock.
Concentration Of Spot BTC Inflows In December
Data from Glassnode has revealed that Spot Bitcoin ETFs recorded a total net inflow of $4.63 billion in December, almost doubling their 2024 monthly average of $2.77 billion. Notably, Glassnode disclosed that the surge in Spot Bitcoin ETF inflows was more concentrated during the first half of the month, while the second half saw outflows, with December 26 being the exception.
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Not surprisingly, the timing for this surge and subsequent decline in Bitcoin ETF inflows aligns with BTC’s price movements in December. At the beginning of the month, BTC experienced upward momentum, skyrocketing to a new ATH above $108,000 on December 17, fueled by the bull market hype and soaring demand. However, following this peak, BTC’s price saw a sharp decline, a drop that coincided with the timing of significant outflows from Spot Bitcoin ETFs, as reported by Glassnode.
Despite the surge in demand for Spot Bitcoin ETFs in December, new data shows that investors have extended their accumulation trend into January 2025. On January 3, investors purchased over $900 million worth of BTC through Spot Bitcoin ETFs. More recently, US Spot Bitcoin ETFs acquired an additional 9,500 BTC, worth over $966 million at the current market price.
Featured image created with Dall.E, chart from Tradingview.com
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