Bitcoin’s supply cap of 21 million units has sparked massive interest from investors, with over $25 billion flowing into spot exchange-traded funds (ETFs) since the beginning of the year. The increasing demand comes as the supply of bitcoin becomes more constrained, with over 19 million units already mined and a drop in the amount of newly issued bitcoin scheduled for this month’s halving event, reducing the daily output from 900 to 450 units.
The Securities and Exchange Commission (SEC) recently approved applications for spot-based bitcoin ETFs after more than a decade of waiting. This led to record-breaking debuts for ETFs from firms like BlackRock, Fidelity, and Invesco, with 10 new spot bitcoin ETFs amassing $35 billion in assets under management. These funds have been demanding more bitcoin than miners produce, with an average daily demand exceeding the daily output of miners by almost 3 times.
Demand for bitcoin is expected to continue outstripping supply as ETFs are already purchasing more bitcoin than miners create daily. The upcoming halving event will further cut the daily supply, leading to an even larger gap between supply and demand. Historically, halving events have been bullish for bitcoin prices, with significant price increases following the 2016 and 2020 events.
Market analysts are skeptical that the high net inflows into bitcoin ETFs are due to investors front-running expected price jumps after the halving event. Most investors are allocating to bitcoin as a hedge against currency debasement and for portfolio diversification, rather than trying to time the market. Investors should be prepared for potential price fluctuations post-halving, as historical patterns indicate a period of sideways movement before entering a new bull market phase.
Those looking to invest in bitcoin have various options, including direct purchases through cryptocurrency exchanges or brokerage firms like Robinhood or Fidelity. There are also 11 U.S.-based bitcoin ETFs to choose from, as well as covered-call strategy ETFs like the Roundhill Bitcoin Covered Call Strategy ETF, which offer exposure to bitcoin’s upside and generate income from selling call options. Investing in companies like MicroStrategy, which holds a substantial amount of bitcoin, or exchange platforms like Coinbase, can also provide exposure to bitcoin’s potential upside.
As demand for bitcoin continues to grow and supply remains constrained, analysts predict significant price appreciation, with projections of bitcoin reaching $100,000 by the end of 2024. The market is expected to enter a new bull phase by late 2025, with continued price growth anticipated. Investors have multiple avenues for gaining exposure to bitcoin’s potential upside, making it an attractive investment option in the current market landscape.
