Bitcoin Supply Shrinks 30% in 18 Months as Institutional Demand Surges

Bitcoin’s circulating supply is rapidly decreasing, which could potentially lead to significant price increases as demand continues to rise, according to Sygnum Bank’s June 2025 Monthly Investment Outlook. Analysts at Sygnum noted that Bitcoin’s liquid supply has decreased by 30% over the past 18 months, primarily due to institutional adoption and the rise of Bitcoin acquisition vehicles.

These entities, including exchange-traded funds (ETFs) and corporate buyers, have been steadily withdrawing coins from exchanges, a move that is typically seen as bullish. According to the report, “Bitcoin’s fast-shrinking liquid supply is creating the conditions for demand shocks and upside volatility.” Since late 2023, Bitcoin balances on exchanges have fallen by about 1 million BTC. This trend is accelerating as more funds issue equity or debt to purchase Bitcoin, further reducing the available supply.

Geopolitical and fiscal uncertainties, particularly around the weakening US dollar and ballooning US debt, are driving investors toward crypto markets. Three US states have recently passed legislation permitting Bitcoin reserves, with New Hampshire already signing such a bill into law and Texas likely to follow. International interest is also growing, with Pakistan’s government and Reform UK, the party currently leading in UK election polls, announcing intentions to explore Bitcoin reserve strategies.

Though official Bitcoin reserve purchases have yet to materialize, Sygnum said that when these begin, they could be a major catalyst for upward price movement, “both because of the demand it creates and because of the signaling effect.” Institutional buying isn’t the only factor at play. Bitcoin’s image as a safe-haven asset is being reinforced by recent market dynamics. The report pointed to the sell-off in US Treasurys amid deteriorating fiscal conditions, buoying demand for Bitcoin and gold in May.

Sygnum also highlighted Bitcoin’s improving volatility profile. Over the past three years, upside volatility has outpaced downside volatility, a sign of market maturation and growing institutional involvement. “Although over the full history of Bitcoin, downside shocks have often been greater than upside shocks, over the past three years (since June 2022), upside volatility has consistently exceeded downside volatility,” the report said.

In addition to Bitcoin, Sygnum mentioned that Ether (ETH) is regaining momentum after years of underperformance. The recent Pectra upgrade has driven strong revenue growth and renewed interest from major financial institutions building tokenization platforms on Ethereum and its layer-2 networks.

In summary, the shrinking supply of Bitcoin, driven by institutional adoption and geopolitical uncertainties, is setting the stage for potential price surges. The increasing demand for Bitcoin as a safe-haven asset and the improving volatility profile further support this outlook. As more entities explore Bitcoin reserve strategies, the conditions for significant price movements are becoming more favorable.