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.
As the dust settles on a tumultuous December in the crypto markets, fresh data reveals a fascinating tale of surging demand for Spot Bitcoin Exchange Traded Funds (ETFs) in the United States, a phenomenon that could herald the impending arrival of a BTC supply shock.
According to the latest report from Blockchain.com, US Spot Bitcoin ETFs acquired an impressive 51,500 BTC in December. In stark contrast, BTC miners brought a mere 13,850 coins into the market during this same period. This striking disparity highlights the immense scale of the demand disparity, with ETFs alone purchasing nearly four times the amount of BTC generated and supplied by miners that month.
This surging demand for ETFs was nothing short of extraordinary, outpacing the available supply by an astonishing 272%, as reported by Blockworks. This massive increase in demand for Spot Bitcoin ETFs has raised concerns about a potential BTC supply shock, with some analysts predicting that it could be on the horizon.
Crypto analyst Lark Davis announced earlier in December that “a massive supply shock is coming,” basing this alarming forecast on the significant accumulation of BTC from US Spot Bitcoin ETFs. At the time, Davis reported that BTC ETFs had purchased an astonishing 21,423 BTC, while miners had only managed to produce around 3,150 BTC over the same period.
The analyst also highlighted the impressive holdings of BTC ETFs, with around 1,311,579 BTC in their coffers as of December 17, 2024. This vast quantity, valued at $139 billion, constitutes a substantial 6.24% of BTC's total supply of 19.8 million. Given this staggering figure, Davis anticipates 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.
Data from Glassnode reveals that Spot Bitcoin ETFs recorded a total net inflow of $4.63 billion in December, nearly doubling their 2024 monthly average of $2.77 billion. Interestingly, Glassnode reports that the surge in Spot Bitcoin ETF inflows was concentrated in the first half of the month, with outflows being recorded in the second half, except for December 26.
Unsurprisingly, the timing of 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 all-time high (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, valued at over $966 million at the current market price
