2 Months After Spot Bitcoin ETF Approval: Onchain Data Reveals BTC Supply Shortages
By Hedy Bi, OKG Research
As March commenced, the Federal Reserve (FED) released its semi-annual monetary policy report. With market expectations for rate cuts rising in June, gold prices surged to 2024 highs. Just a day later, BTC also reached a new market capitalization peak. The approval of a spot Bitcoin ETF can be viewed as a watershed moment, and two months later, the financial catalysts are accelerating the maturation of the crypto market, making it even more complex.
However, as an “honest” indicator reflecting the true market conditions, onchain data reveals BTC supply shortages. As the OKG Research stated in its previous article, “Countdown: Less than 24h Until Decision on Spot Bitcoin ETF Approval — The U.S. Reluctant to Let Go!” , that new markets are poised for growth, while existing markets are more resolute. This article, combining onchain data from OKLink, CryptoQuant, and Glassnode, provides an analysis of the BTC market from the perspective of supply, demand, and market distribution.
I. Analyzing BTC Supply and Demand Through Onchain Data
From the supply side, according to CryptoQuant data as of the time of writing, more than 30 cexes are currently experiencing BTC outflows, totaling approximately 71,934 BTC.
Additionally, we observe a sustained selling pressure from miners, primarily driven by their efforts to liquidate holdings ahead of the next halving event. The forthcoming halving will reduce the mining reward from 6.25 BTC to 3.125 BTC. As of the time of writing, wallets associated with BTC miners have registered a net outflow of approximately 8,530 BTC since the spot Bitcoin ETF approval. In other words, the combined reduction in BTC supply from exchanges and miners amounts to approximately 80,464 BTC. Here, we have calculated using the net outflow figures, as they account for the difference between miners’ hoarding demand and their actual BTC mining output.
From a supply-side perspective, this sustained distribution from major sources indicates a potential shortage in the market, exacerbated by the imminent halving event that will constrict new issuances. The depletion of stockpiles, both from trading platforms and mining entities, suggests a supply-demand imbalance that could intensify market tightness.
On the demand side, according to a composite calculation from CryptoQuant and Farside data, the cumulative capital inflows through the spot Bitcoin ETF channel have reached $9.594 billion. Compared to when the spot ETF was allowed to trade, the netflow as of the March 8th local market close was approximately 176,396 BTC. The spot ETF alone has created a supply shortfall for BTC, with the current deficit estimated at over 95,000 BTC. However, miners remain the true source of sustainable BTC supply. While other channels like exchange outflows exist, they do not represent a consistent supply.
In approximately 44 days, the next Bitcoin halving will further constrain new supply, cutting issuance rates by 50%. As designed, Bitcoin undergoes halving every 210,000 blocks mined until the final coin is issued by 2140, with a total fixed supply of 21 million BTC.
However, this upcoming halving event differs from previous ones due to an innovative development within the Bitcoin ecosystem — Inscriptions. According to onchain data from Dune Analytics, Inscriptions have already contributed 6,290 BTC in fees to the ecosystem, supplementing miners’ revenue streams. As Bitcoin’s innovative applications and Layer 2 scalability solutions continue to evolve, miners’ income prospects are expected to increase, alleviating some of the sell pressure stemming from operational costs. This dynamic suggests a divergence from previous halving cycles, where miners faced more acute selling pressures to sustain operations. Consequently, miners may exhibit a greater propensity for hoarding rather than offloading supply to the market.
II. BTC Market Distribution: The Onchain Migration
Assuming that the influx of new investors is primarily driven by the spot Bitcoin ETF, the non-zero addresses onchaincan be considered representative of existing investors. According to data from OKLink, the number of non-zero addresses has exhibited a notable upward trend, suggesting an increase in the number of addresses holding assets, rather than merely reflecting greater address interactions. This pattern indicates signs of a migration of BTC holdings onto the blockchain.
More detailed and specific BTC movements can also be viewed by BTC blockchain explorer to see real-time developments as well as large transfers. As you can see from the OKLink data, BTC has also seen an increase in the frequency of large transfers in recent days.
According to Glassnode, the number of BTC being moved into long-term storage is increasing at a quarterly rate of 180,000 BTC, which is twice the pace of newly mined BTC. This shift towards holding BTC for the long term further tightens the supply of BTC and could strengthen the price foundation as the halving approaches, according to analysts.
Long-term holders moving to onchainstorage are showing an expanding trend both in terms of the number of addresses and the amount of funds. According to a recent report by Glassnode, the BTC lockup rate for long-term investment has exceeded 200% of the new supply. This indicates that despite ongoing mining of new BTC, more BTC is being held by investors rather than being sold or traded.
III.VS Gold ETFs? also look at scarcity
Moving on to the comparison with gold ETFs? Let’s talk scarcity. Apart from onchain data showing BTC currently in a state of high demand and its scarcity continuing, the issuance speed and total supply of 21 million BTC have been dictated by its underlying protocol since its inception.
Speaking of scarcity, we can’t overlook gold. Often compared to BTC, gold is also considered a “scarce” asset due to its high mining costs and limited natural resources. Particularly in times of inflation and conflict, its scarcity advantages become more prominent, earning it the status of a paradigm for fear trades. Consequently, historical performance in the gold market is often used for analysis in comparison with the BTC market.
In terms of ETF performance, since the approval of the first gold ETF in 2004, gold prices have consistently risen, with an increase of up to 346% in less than 10 years. However, gold took a considerable amount of time to gain widespread acceptance. In contrast, BTC only took 15 years from its inception to the approval of a spot ETF in 2024. Despite the ongoing hype in the market, it’s essential to consider gold’s significant historical status in the financial realm. In 1717, the United Kingdom first adopted the gold standard, incorporating gold as a crucial component of the monetary system.
When discussing BTC as “digital gold,” its uniqueness in the financial system is worth noting alongside its physical scarcity. BTC’s decentralized design allows it to be held outside the traditional financial system, providing billions of people without bank accounts the opportunity to access the global financial system.
As the BTC market evolves, its decentralized nature diversifies participants and deepens connections with traditional financial markets. The complexity of the market is closely related to data access. In this context, analyzing and accessing onchain data is more convenient compared to traditional financial market data. Onchain data sourced from node networks worldwide, with the characteristics of a public ledger, enables anyone to conduct real-time market analysis and statistics without relying on centralized institutions. This decentralization brings transparency, fairness to data, and effectively mitigates the risk of single points of failure and tampering.
In the increasingly mature and complex crypto market, access to and analysis of onchain data is more accessible compared to other financial market data. The more complex the market, the more evident the advantage of onchain data. Due to its uniqueness, onchain data will become the most reliable source for understanding market truths.
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