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Seven days after the launch of the new Bitcoin ETFs, I analyzed how they could put pressure on Bitcoin's supply dynamics in an article titled “If BlackRock Keeps Buying 6,000 BTC a Day, We'll Have a Crisis of the offer within 18 months; Here's why.' On the day it was released, January 18, Bitcoin closed at $41,248 after falling from a high of $49,000 on January 11. Since then, the flagship digital asset has climbed 37% to exceed $57,000.
While Bitcoin had steadily fallen after the ETF's launch, CryptoSlate noted the persistent inflows of BTC, which, at the time, averaged about 6,266 BTC per day for BlackRock alone. The analysis found that if such inflows continue, Bitcoin's liquid supply could be absorbed this year, with exchange balances or highly liquid supplies potentially targeted by mid-2025.
As noted at the time, the analysis was purely hypothetical and did not take into account Grayscale GBTC releases. Additionally, it only looked at BlackRock, the largest fund, to simplify the data at this point. The exercise was intended to highlight the potential for supply squeeze and the lack of liquid Bitcoin to ease continued ETF supply pressure. On January 18, BlackRock managed 25,067 BTC, valued at $1 billion.
Interestingly, although inflows to BlackRock did not maintain the daily average pressure of 6,266 BTC, inflows to the Newborn Nine exceeded this level. BlackRock currently has 130,231 BTC under management, while the fund would have 275,707 BTC if it continued at 6,266 BTC daily. However, on January 18, 6,266 BTC was valued at $258 million, which would now represent an inflow of $357 million, given the dramatic price surge.
It is important to remember that spot Bitcoin ETFs are purchased in dollars and denominated in dollars in a brokerage account. So while inflows into the ETF have been consistent in dollar terms, they have been reduced in terms of Bitcoin purchases.
Through the nine newborns, 303,002 BTC is now owned under management by K33 Research. Looking at the CryptoSlate table used for the January 18 article, this matches the projected inflows for BlackRock by March 2, 2024.
Using this data, if the Newborn Nine continue to absorb Grayscale's declining outflows and purchase additional Bitcoin from the broader market at this rate, 1 million BTC could be under management by June. Additionally, this rate would devour the BTC equivalent of Bitcoin's entire current liquid supply (around 1.3 million BTC) by September.
On February 8, I discussed the potential for the “Mother of All Supply Squeezes” for Bitcoin, which is akin to the GameStop saga but even more effective. The price has jumped 29% since this article went live in just 19 days, an average of 0.65% per day. Bitcoin ETFs have continued to buy and Grayscale outflows are slowing.
The conditions for a compression of supply seem to be present; the only question I see is: at what level is demand affected by price? Do Bitcoin ETF buyers continue to buy if Bitcoin is at $100,000? Well, at that price, BlackRock's IBIT would be around $60 per share. It doesn't seem so expensive for new investors anymore, does it?
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