Bitcoin Supply Shock: Bitcoin ETFs Have Already Scooped Up 4% of Total BTC

Ever since the launch of the spot Bitcoin ETFs in January, institutional investors have shown a massive appetite for the asset class.  The inflows in the Bitcoin ETFs have been skyrocketing so far with BlackRock’s IBIT leading the market share by a huge margin.

Wall Street Giants Buying Bitcoin ETFs

Bitcoin is attracting interest from major players on Wall Street, who are amassing significant treasuries of the cryptocurrency. Interestingly, the Bitcoin exchange-traded funds (ETFs) in the United States now hold nearly 4% of the total supply of Bitcoin.

According to BitMEX Research, spot funds collectively held 776,464 BTC ($47.7 billion) as of Friday morning. Currently, there are 19.64 million BTC ($1.21 trillion) in circulation, with the eventual limit of 21 million expected to be reached over the next century or more.

GBTC previously held nearly 3.2% of the total bitcoin market before the launch of ETFs, but has since seen a decline in its bitcoin holdings, now accounting for 2.2% of the supply.

MicroStrategy, recognized as the largest corporate treasury globally, has acquired 0.98% of the Bitcoin supply (equivalent to 193,000 BTC valued at $11.88 billion). Founded by staunch Bitcoin advocate Michael Saylor, the publicly-listed data intelligence firm has seen a remarkable 95% return on its Bitcoin investments to date.

Since its initial Bitcoin purchase in August 2020 at around $11,000 per BTC, MicroStrategy’s share price has closely mirrored Bitcoin’s performance, with the cryptocurrency surging approximately 450% since then.

The US government is also a significant holder, believed to possess up to 215,000 BTC ($13.23 billion), representing around 1.1% of Bitcoin’s circulating supply. These coins were seized in various criminal cases, including those related to Silk Road and the Bitfinex hack in 2016.

New ETFs Bring Legitimacy to the Crypto Bull Market

The current crypto bull market distinguishes itself from previous boom-and-bust cycles, primarily due to the air of legitimacy instilled by the introduction of spot Bitcoin ETFs. Unlike prior cycles driven by risk-embracing speculators and products prone to collapse, these ETFs offer a regulated and transparent avenue for investors.

Historically, crypto markets were characterized by speculative investments such as crypto loans and initial coin offerings (ICOs), often lacking proper backing or tangible products. However, the emergence of ETFs signifies a shift towards a more regulated and institutionalized market environment.

Individual investors participating in this rally also contribute to the market’s evolution. According to Michael Novogratz, founder of Galaxy Digital, there’s a notable influx of new buyers entering the space. He highlighted the significance of this demographic shift, noting that for the first time in his 11-year involvement in crypto, Baby Boomers and older individuals now have accessible means to invest in cryptocurrencies through ETFs.