Bitcoin Supply Squeeze Intensifies as Ancient Supply Outpaces New Issuance

The Bitcoin supply squeeze is intensifying as the number of coins held for over 10 years, known as "ancient" Bitcoin, is increasing at a faster rate than new coins are being mined. Currently, 550 BTC per day are entering the ancient supply category, surpassing the 450 BTC issued daily. This trend is significant as it indicates a growing scarcity of Bitcoin in the market.

Fidelity Digital Assets highlighted this shift in a recent report, noting that the ancient Bitcoin supply has started to outpace new issuance. This trend, combined with steady purchasing from institutional investors, raises questions about the potential impact on Bitcoin's price. The report suggests that this increasing demand could drive Bitcoin's price to unprecedented levels, potentially reaching $1 million per coin.

The current ancient supply of Bitcoin is over 17% of the total issuance, valued at approximately $360 billion at the current price of $107,000 per BTC. This reflects strong holder conviction, with daily decreases in the ancient supply occurring less than 3% of the time. Projections suggest that this share could reach 20% by 2028 and 25% by 2034, further tightening the available supply.

Institutional investor capital is also accelerating, with Bitcoin inflows expected to reach $120 billion by 2025 and $300 billion by 2026, according to Bitwise. This influx is driven by diverse participants, including nation-states potentially reallocating 5% of their gold reserves, US states adopting Bitcoin at 30%, wealth management platforms allocating 0.5%, and public companies doubling their holdings. In a bull case scenario, inflows could exceed $426 billion, absorbing over 4 million Bitcoin and further tightening liquidity.

This institutional accumulation, alongside the growth in ancient supply, suggests a scenario where a significant portion of Bitcoin’s supply becomes illiquid. This could potentially amplify analysts’ price targets due to increasing demand. However, challenges remain, as market conditions can trigger supply increases, potentially moderating price appreciation. For instance, after the 2024 US election, the ancient supply has declined on 10% of days, nearly four times the historical average, indicating that even long-term holders can sell during volatility.

Despite these challenges, the current trajectories suggest that reaching $1 million per Bitcoin is a realistic price target. The fixed supply and growing illiquidity of Bitcoin could facilitate its next significant milestone. Historical trends after halving events in 2013, 2017, and 2021 exhibit rallies driven by reduced supply growth and rising demand, supporting the thesis that current dynamics could lead to a similar outcome.

In conclusion, the intensifying supply squeeze of Bitcoin, driven by the increasing ancient supply and institutional inflows, presents a compelling narrative of increasing scarcity. While reaching $1 million per Bitcoin is an ambitious target, the current trends suggest it is a plausible outcome. However, investors should conduct their own research and consider the risks involved in any investment decision.