Bitcoin's Fixed Supply vs. Soaring Institutional Demand: A $1M Future Unfolds

Bitcoin price is currently in a consolidation phase following a rebound from the $107,000 support level. While signs of bullish momentum are emerging, the next move will depend on whether the price can break through key liquidity levels or face a pullback for further accumulation. Analysts highlight a defined trading range between $107,000 support and $123,000 resistance on the daily chart. The recent rebound from the lower boundary has pushed the price back above the 100-day moving average, indicating renewed buying interest.

On the 4-hour chart, Bitcoin has climbed close to the $117,000 swing high. A short-term pullback into the $110,700–$113,100 demand zone cannot be ruled out. This area has shown strong buying interest in the past, and a successful retest could reinforce the bullish case. If buyers defend this zone and reclaim momentum, the liquidity above the swing high could act as a magnet, potentially fueling a continuation move toward higher levels.

On-chain analysis shows a cluster of liquidations just above the recent swing high, aligning with the liquidity seen in the 4-hour chart. Markets often accelerate into such zones, as stop orders and forced liquidations amplify momentum. A clean push through the swing high could trigger a cascade of covering by short sellers, driving the price higher.

Bitcoin has been trading within a defined range, with institutional and sovereign adoption playing a significant role in shaping the market dynamics. The fixed supply of 21 million Bitcoin contrasts with the evolving demand curve, influenced by institutional purchases and strategic reserves. As of the fourth halving in April 2024, Bitcoin’s liquid supply was approximately 11.1875 million coins. Institutional and corporate entities, such as MicroStrategy, are actively acquiring Bitcoin, further draining the liquid supply and contributing to price appreciation.

The interplay between fixed supply and growing demand is a critical factor in Bitcoin’s price trajectory. A recent model developed by researchers suggests that Bitcoin’s price could appreciate significantly if withdrawals from liquid supply to strategic reserves continue. For example, if 2,000 coins per day are removed from the market, the forecasted price by April 2036 could reach $1,093,690. Higher withdrawal levels could lead to hyperbolic price increases due to supply scarcity.

The demand shift multiplier and elasticity parameters are also key factors in Bitcoin’s price forecasting. A 10X increase in the demand shift parameter could push Bitcoin’s price to $648,890, even without withdrawals from liquid supply. This indicates that growing institutional demand can significantly impact Bitcoin’s price, independent of supply-side dynamics.

Institutional adoption is further accelerating due to strategic reserve initiatives and financial engineering innovations. For instance, companies issuing low-coupon convertible bonds specifically to fund Bitcoin purchases are demonstrating how credit-driven demand could deplete the liquid supply. As of mid-December 2024, the Bitcoin market price stood at $102,000, suggesting a substantial increase in demand compared to earlier in the year.

The current market conditions also indicate a wave of institutional adoption for 2025 and beyond. Factors such as MicroStrategy’s inclusion in the Nasdaq 100 index, FASB accounting standard changes, and growing international interest in strategic reserves are contributing to a more aggressive bull market scenario. In this context, Bitcoin’s price could reach $1 million by early 2027 under certain withdrawal and demand assumptions.

Bitcoin’s price sensitivity to changes in liquid supply is a notable characteristic of its market dynamics. A decrease in supply, such as the purchase of Bitcoin for long-term strategic reserves, leads to a reduced quantity traded and a higher price. Conversely, an increase in supply, such as newly issued Bitcoin or HODL coins returning to the market, leads to an increased quantity traded and a lower price.

Looking ahead, Bitcoin’s perfectly inelastic supply curve means that the pace of withdrawals from liquid supply to long-term reserves will strongly influence price appreciation and volatility. While preliminary, these models provide valuable price forecasts that could help investors develop forward-looking portfolio allocation strategies, particularly for institutional and government investors.