Key Factors Behind the Stabilizing Market #CriptoNews

A potential U.S. Bitcoin strategic reserve, many market experts have speculated about the possibility of a major supply shock in 2025. This speculation suggests that Bitcoin’s price could see extraordinary growth, potentially disrupting the traditional 4-year cycle theory. However, a new report from CEX.IO offers a different perspective, arguing that such a supply shock is unlikely in the coming year.

Analyzing Bitcoin Long-Term Holder (LTH) Supply

One of the key concerns surrounding Bitcoin’s supply is the behavior of long-term holders (LTHs). Historically, Bitcoin halvings have led to significant changes in LTH supply, triggering the movement of coins from long-term holders to short-term holders (STHs), which increases market liquidity. The report highlights this as a critical factor in ensuring that Bitcoin’s supply remains stable.

In 2024, LTH supply dominance fell by 9%, releasing approximately 1.58 million BTC into the market. This trend is expected to continue in 2025, with an estimated 1.4 million BTC moving from LTHs to STHs. This transfer is expected to temper potential supply constraints, as LTHs are likely to take profits, thereby maintaining liquidity even in the face of increased institutional demand or government interest.

ETF Dynamics and OTC Activity

Another potential source of supply shock is the growing activity surrounding Bitcoin exchange-traded funds (ETFs). The introduction of U.S. spot Bitcoin ETFs has raised concerns that institutional demand could put significant pressure on Bitcoin’s supply. However, the report suggests that this fear may be overstated.

While U.S. spot Bitcoin ETFs accumulated over 1.13 million BTC in 2024, much of this accumulation stemmed from cash-and-carry trades—arbitrage strategies reliant on derivatives like CME futures. These trades do not directly impact the spot market in the same way as directional investments would. Moreover, ETFs currently account for less than 4% of Bitcoin’s total trading volume, further reducing their potential to drive a systemic supply imbalance.

Market Liquidity and Exchange Reserves

Market liquidity plays a crucial role in ensuring that Bitcoin’s supply remains balanced. CEX.IO’s report notes that while exchange-held Bitcoin reserves dropped to record lows in 2024, most of these withdrawals were directed toward cold storage rather than being sold off. This suggests that long-term confidence in Bitcoin remains high.

Simultaneously, over-the-counter (OTC) platforms have seen their holdings increase by more than 200,000 BTC. This indicates a redistribution of liquidity rather than a depletion of supply. The rise in OTC holdings suggests that liquidity is being diversified across different platforms, further stabilizing the market.

Improved Liquidity Conditions for 2025

The report also highlights improving market depth and liquidity conditions. In 2024, USD-denominated liquidity rose by 61%, even though BTC-denominated depth declined. This shift indicates that the market is becoming more resilient, with larger exchanges consolidating market share and U.S.-based platforms expanding their dominance.

This growing liquidity resilience is a positive sign for 2025, as it shows that the market is better equipped to handle increased demand without triggering a supply shock. The diversification of liquidity sources and the strengthening of market depth suggest that Bitcoin’s supply will remain well-positioned for measured growth, in line with the traditional 4-year cycle.

Conclusion: A Balanced Market Poised for Measured Growth

CEX.IO’s analysis concludes that, despite fears of a Bitcoin supply crisis, the market’s liquidity and structural dynamics suggest that a significant supply shock is unlikely in 2025. Long-term holder profit-taking, stable ETF dynamics, and the growing strength of market liquidity all point to a balanced and active market.

Rather than facing a dramatic supply shock, Bitcoin’s market is poised for steady growth within the framework of its established 4-year cycle. As institutional interest continues to grow and the market matures, Bitcoin is expected to experience measured growth, with the underlying supply ecosystem remaining strong and capable of absorbing increased demand.

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