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Bitcoin's Supply Shock Thesis
Despite the recent sell the news reaction, bitcoin still retains its 43 000 USD level, while the spot price has strengthened 84 percent within the past 12 months. Bitcoin's anticipated halving event is approaching within 77 days, and it carries a value proposition of increasing the scarcity of the digital asset. The halving literally halves the current block reward from 6,25 to 3,125 bitcoin units. In addition to the halving event, the bitcoin market is being transformed by the inception of eleven new SEC-approved spot ETFs, that act as on-ramps for institutional adoption. So far, the spot bitcoin ETF field has been somewhat divided, characterized by the Grayscale Bitcoin Trust’s (GBTC) selling pressure, contrasted by the rise of BlackRock (IBIT) and Fidelity (FBTC). Although the spot ETF approvals were seen as a single event, the future market structure might be more like a continuum. According to Bloombergs’s Eric Balchunas, the finance giant Charles Schwab could launch their own ETF, raising the total amount of US-based funds to twelve. According to Balchunas, the management fee for Schwab's fund would be only 10 basis points, which is significantly more cost-effective than BlackRock's 25 basis points. Grayscale, as the oldest player in the field, may be forced to reduce its astronomical 150 basis point management fee to stay competitive. "Charles Schwab may shock the world & offer something that’s 10bps in a few months. They’re never first to market in anything but they make back impact when they come in." - Eric Balchunas, Bloomberg The recently opened spot ETF floodgates will create an environment of potential bitcoin supply shock: Approximately 80% of bitcoin's circulating supply is illiquid and most of investors are heavily in profit, thus they're less likely to sell. The demand shock coming from the expanding spot bitcoin ETF market, the halving-related supply shock, and long-term holders create a perfect storm towards higher valuations.