Bitcoin’s Ancient Supply vs. Short-Term Volatility: A New Paradigm for Long-Horizon Investors

Bitcoin’s value proposition has always been rooted in its scarcity. With a hard cap of 21 million coins and a predictable supply schedule, Bitcoin’s scarcity is a mathematical inevitability. However, the interplay between this long-term scarcity and near-term volatility has become a defining tension for investors in 2025. As the network approaches its final halving in 2140, the growing dominance of “ancient supply” — coins untouched for over a decade — and institutional adoption are reshaping the asset’s risk-reward profile.

Scarcity-Driven Value Creation: The Ancient Supply Thesis

Bitcoin’s supply schedule is a clockwork mechanism of deflation. The 2024 halving reduced block rewards to 3.125 BTC per block, and the next halving in 2028 will cut this to 1.5625 BTC [1]. By 2034, ancient supply (coins inactive for 10+ years) is projected to account for 25% of the total issued supply, surpassing new issuance in April 2024 [3]. This shift signals a maturing network where long-term holders (LTHs) increasingly control the majority of Bitcoin, reducing circulating supply and reinforcing scarcity.

Institutional adoption has accelerated this trend. Mid-tier holders (100–1,000 BTC) now control 23.07% of the supply, while 15% is held by institutional investors [1]. The launch of US spot Bitcoin ETFs, such as BlackRock’s iShares Bitcoin Trust, has institutionalized demand, drawing $496.8 million in a single month [1]. These developments suggest that Bitcoin’s price is increasingly driven by macroeconomic trends and regulatory clarity rather than halving events alone [1].

Short-Term Volatility: Distribution Risks and Market Dynamics

Despite the scarcity narrative, Bitcoin’s price in Q3 2025 faces headwinds from distribution risks. Institutional selling pressure and miner outflows have created volatility. For instance, a $2.7 billion BTC offloading in August 2025 triggered a 4% price correction [3]. ETF outflows have also amplified instability: Bitcoin ETFs saw $126.6 million in net outflows on a single day, led by Fidelity’s FBTC [5]. These outflows, combined with historically low 30-day deposit averages, have compressed liquidity, making the market more susceptible to demand shocks [1].

On-chain metrics highlight this tension. The MVRV-Z ratio, which measures price relative to investors’ average cost basis, is in the overbought zone at 2.49, signaling potential near-term pullbacks [4]. Meanwhile, the aSOPR (1.019) and NUPL (0.558) remain stable, indicating overall market health [4]. This duality — a strong fundamental base coexisting with fragile liquidity — defines Bitcoin’s current phase.

The New Paradigm: Balancing Scarcity and Volatility

For long-horizon investors, Bitcoin’s value creation is increasingly decoupled from short-term volatility. The transition from retail-driven speculation to institutional accumulation has created a new equilibrium. While 94 wallets hold over 10,000 BTC each, including entities like MicroStrategy, the market’s structure is shifting toward high-value, long-term transactions [1]. This trend is reinforced by corporate purchases and ETF inflows, which have stabilized 15% of the total supply [3].

However, risks persist. Profit-locking resistance levels between $116k and $119k could trigger selling pressure if Bitcoin approaches these ranges [1]. Historical analysis of resistance-level breakouts from 2022 to now reveals that 44 such events occurred, with an average cumulative return of 6.9% over 30 days and a win rate of 60% after day 5. While these results are not statistically significant at conventional levels, they suggest a modest positive skew following breakout events. Additionally, macroeconomic uncertainty — such as delayed Federal Reserve rate cuts — adds to near-term volatility [4]. Yet, predictive models suggest Bitcoin could reach $190,000 by year-end, driven by global liquidity, ETF demand, and 401(k) access [4].

Conclusion

Bitcoin’s ancient supply and institutional adoption are forging a new paradigm for long-horizon investors. While short-term volatility remains a reality, the asset’s scarcity-driven fundamentals and maturing market structure position it as a core institutional holding. For investors with a multi-year horizon, the key lies in balancing the inevitability of Bitcoin’s supply constraints with the dynamic forces of distribution and macroeconomic cycles.

Source:
[1] Bitcoin's Short-Term Volatility vs. Long-Term Scarcity-Driven Potential Supply Chain Analysis [https://www.ainvest.com/news/bitcoin-short-term-volatility-long-term-scarcity-driven-potential-supply-chain-analysis-2508/]
[2] Understanding Bitcoin Halving: Impact on Price and [https://www.investopedia.com/bitcoin-halving-4843769]
[3] The Increasing Impact of Bitcoin's Ancient Supply [https://www.fidelitydigitalassets.com/research-and-insights/increasing-impact-bitcoins-ancient-supply]
[4] Q3 2025 Bitcoin Valuation Report [https://www.chaincatcher.com/en/article/2199982]
[5] Bitcoin ETFs Face $126M Outflows as Amdax Secures $23M Bid [https://coincentral.com/bitcoin-etfs-face-126m-outflows-as-amdax-secures-23m-bid]