The upcoming Bitcoin halving is set to cause a significant reduction in the supply of Bitcoin on cryptocurrency exchanges. This, combined with continued demand from US Bitcoin exchange-traded funds (ETFs), will result in a depletion of Bitcoin reserves held by exchanges, according to a report by Bybit.
Data from CryptoQuant shows that Bitcoin reserves on centralized exchanges dropped to a three-year low of 1.94 million BTC on April 16th. This decline in supply comes at a time when Bitcoin has experienced a market slump, with a 10% decrease in value over the past week.
Despite the current correction, Bybit, the world’s third-largest exchange, predicts that Bitcoin prices will begin to recover. The report also highlights the increasing institutional interest in Bitcoin, with weekly inflows to spot Bitcoin ETFs slowing down since March. However, these ETFs have still accumulated over 841,000 BTC, worth $52.9 billion, since their launch.
Furthermore, the allocation of Bitcoin by investors has been on the rise since September 2023. Institutions, on average, allocate 40% of their total assets to BTC, while retail investors average a Bitcoin allocation of 24%. Bybit’s asset allocation report from Feb. 24 also reveals that both crypto-native firms and traditional institutions are increasing their exposure to Bitcoin through ETFs or proxy stocks like MicroStrategy. The exchange expects more institutions to follow suit.
Overall, the Bitcoin halving is expected to lead to a more sustainable BTC mining industry, and the reduction in supply on exchanges is likely to have a positive impact on Bitcoin prices in the long run.