The following is my personal opinion and does not constitute financial advice.

2020 edition here

I like to make these posts to catalog my thoughts and what I perceive to be a setup for a supply shock. The truth is nobody knows exactly what will happen to the price and unforeseen developments could completely alter the supply/demand mechanics of the market, but what we’re seeing now gives me reason to believe 2024-2025 will be a great period for spot BTC holders.

Onchain Metrics

• BTC hashrate has continued to climb to ATHs despite the price drop from ~$70k

• Although shrimps (<1 BTC) are currently distributing, they have recently shown a capacity to accumulate aggressively to the tune of ~23k BTC/month

• Whales have recently picked up their accumulation while shrimps are distributing

• Realized cap is currently only -5.4% from ATH

• BTC supply last active in 1+ years looks to be peaking at around 70%, with rallies historically lasting for over a year after peaking

• Bitcoin balances on exchanges have been on a downtrend since January of 2020

ETFs

The long term impact of the spot ETFs should not be understated given the size and structure of US capital markets. Money tied up in Roths, pensions and managed funds previously had no way to get true spot exposure, and now it can with extremely low fees and a variety of asset managers/products to choose from all while potentially being sheltered from tax exposure on the gains.

Total net flows for the spot ETFs currently totals $1.46 billion, with $700m coming in so far this week alone

Anybody unfamiliar with ETFs would ask how successful are these flows compared to other ETF launches. For comparison there were over 600 ETFs launched since the start of 2023, and in terms of assets under management currently IBIT and FBTC are #1 and #2 respectively

The 9 new spot ETFs hold over 160,000 BTC as of yesterday, which they accumulated in ~3 weeks. They will likely eclipse MSTR holdings by early next week, which took 4 years to accumulate. If this pace were to continue we would see well over $10b of net flows coming in by the end of the year.

Halving

The halving is ~80 days away and will drop daily issuance to miners from 900 BTC/day to 450 BTC/day. At current prices that’s roughly $7b worth of supply on an annual basis that will no longer be introduced, occurring roughly at the same time as demand is picking up dramatically from ETFs.

I think there are a lot of other positive developments to consider like the upcoming changes to fair value accounting standards that will make BTC more attractive to hold for companies (wait for MSTR’s Q1 earnings report), the recent change in attitude from google to allow for crypto advertising, the general change in public perception from spot ETF approval, etc. however these are not currently measurable in their impact on supply and demand.