Is this the Bitcoin ETF supply squeeze playing out already? Is this the Bitcoin ETF supply squeeze playing out already?
Bitcoin ETFs have acquired 300k BTC under management in less than 50 trading days.
3 min read
Updated: Feb. 28, 2024 at 2:08 am UTC
Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.
Seven days after the new Bitcoin ETFs launched, I analyzed how they could put pressure on Bitcoin’s supply dynamics in an article called “If BlackRock continues 6k BTC daily buys, we get a supply crunch within 18 months; here’s why.’ On the day of publication, Jan. 18, Bitcoin closed at $41,248 after falling from a high of $49,000 on Jan. 11. Since then, the flagship digital asset has soared 37% to break $57,000.
While Bitcoin had fallen consistently after the ETF launched, CryptoSlate noted the persistent BTC inflows, which, at the time, averaged around 6,266 BTC per day for BlackRock alone. The analysis identified that were such inflows continue, the liquid supply of Bitcoin could be absorbed this year, with the exchange balances or very liquid supplies targetable by mid-2025.
As noted at the time, the analysis was purely hypothetical and did not consider the outflows from Grayscale GBTC. Additionally, it only looked at BlackRock, the largest fund’s inflows, to simplify the data at that point. The exercise aimed to emphasize the potential for a supply squeeze and the lack of liquid Bitcoin to facilitate persistent ETF pressure on the supply. On Jan. 18, BlackRock had 25,067 BTC under management, valued at $1 billion.
Interestingly, while the inflows into BlackRock did not maintain the 6,266 BTC daily average pressure, inflows into the Newborn Nine have surpassed this level. BlackRock currently has 130,231 BTC under management, whereas the fund would have 275,707 BTC if it continued at 6,266 BTC daily. However, on Jan. 18, 6,266 BTC was valued at $258 million, which would now represent an inflow of $357 million, given the dramatic price surge.
It’s important to remember that the spot Bitcoin ETFs are purchased with dollars and denominated in dollars in a brokerage account. Thus, while inflows into the ETF have been consistent in dollar terms, they have been reduced in terms of Bitcoin purchases.
Across the Newborn Nine, 303,002 BTC is now held under management per K33 Research. Looking at the CryptoSlate table used for the Jan. 18 article, this aligns with inflows projected for BlackRock by March 2, 2024.
Using this data, should the Newborn Nine continue to absorb Grayscale’s declining outflows and purchase additional Bitcoin from the broader market at this pace, 1 million BTC could be under management by June. Further, this rate would swallow the BTC equivalent of the entire current liquid supply of Bitcoin (roughly 1.3 million BTC) by September.
On Feb. 8, I discussed the potential for the ‘Mother of all Supply Squeezes‘ for Bitcoin, which is akin to the GameStop saga but even more effective. The price has surged 29% since that article went live in just 19 days, an average of 0.65% per day. Bitcoin ETFs have continued to buy, and Grayscale’s outflows are slowing.
The requirements for a supply squeeze appear to be present; the only question I see is, at what level does the demand become affected by the price? Do Bitcoin ETF purchasers continue to buy if Bitcoin is at $100,000? Well, at that price, BlackRock’s IBIT would be around $60 per share. That doesn’t sound quite as expensive to new investors now, does it?
Mentioned in this article
Bitcoin 
BlackRock 
Fidelity Investments 
Grayscale Investments iShares Bitcoin Trust 
Grayscale Bitcoin Trust 
Fidelity Wise Origin Bitcoin Trust Author 
Liam 'Akiba' Wright
Also known as "Akiba," Liam Wright is a reporter, podcast producer, and Editor-in-Chief at CryptoSlate. He believes that decentralized technology has the potential to make widespread positive change.
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In this article
Bitcoin, a decentralized currency that defies the sway of central banks or administrators, transacts electronically, circumventing intermediaries via a peer-to-peer network.
BlackRock
BlackRock, synonymous with global asset management, is an American multinational investment management corporation based in New York City.
Fidelity Investments
Fidelity Investments Inc., commonly referred to as Fidelity, is a multinational financial services corporation based in Boston, Massachusetts.
Grayscale Investments
Established in 2013 by Digital Currency Group, Grayscale Investments is a trusted authority on digital currency investing and cryptocurrency asset management.
The BlackRock Bitcoin ETF, known as the iShares Bitcoin Trust (IBIT), is an investment fund that provides regulated exposure to Bitcoin for investors.
The Grayscale Bitcoin Trust (GBTC) is a digital currency investment product that provides investors with access to Bitcoin through traditional investment channels.
The Fidelity Wise Origin Bitcoin Trust (FBTC) is a spot Bitcoin ETF that offers investors exposure to the price of Bitcoin.
