BTC Supply

21 Dec, 2020
BTC Supply

Is Bitcoin FOMO keeping you up at night? Does the “Fear of Missing Out” of the current BTC bull market keep you glued to the screen as you watch the price going up, up, up over the past few months?  Do you wonder if the limited supply of BTC will be scooped up before you can jump in?

If you’re asking these questions, you’re not alone.  As the price of BTC pushed past its former all-time high of $19,783 to more than $24,000 last week, there’s growing interest in understanding the supply and demand of the world’s first cryptocurrency.

To get a better picture, start at the beginning of BTC. When Bitcoin was invented in 2008 by Satoshi Nakamoto, the white paper outlining the peer-to-peer cashless system declared that the supply of the coin would be capped at 21 million. Currently about 18.5 million of those coins have been mined with a market capitalization of more than $428 billion. That leaves less than 3 million coins left to be mined.  Analysts speculate that it will take more than 120 years for the remaining unmined coins to come into circulation, which means that if the supply remains true to Nakamoto’s vision, the last Bitcoin would be mined in 2140.

While crypto experts offer varying theories as to the growing interest in Bitcoin, debate continues on whether its limited supply makes the coin more valuable. Or will it stop the digital currency from becoming the new “gold standard” for the world’s monetary system.

Part of Bitcoin’s appeal is that it is of limited supply, Bob Fitzsimmons, the executive vice president for fixed income, commodities and stock lending at Wedbush Securities, said in a recent interview with The Washington Post.

“It’s a potential hedge against conventional financial assets,” Fitzsimmons said.  “The stock market continues to rally, even though our debt deficits are increasing at what many would consider alarming rates. I think people are looking for an alternative other than the stock market right now because where else do you put your money?”

On the flip side, Bitcoin’s “arbitrary supply limit will hinder its future usefulness,” said Malcolm Steven “Steve” Forbes Jr., the American publishing executive.

“The biggest booster of the ‘Bitcoin boom’ is the fear that the Federal Reserve and other central banks are printing too much money,” Forbes said in a recent video, noting that  “Bitcoin only works best when it has a stable value.”

Forbes likened Bitcoin’s fluctuating price to eating “steak one day, dog food the next, (and) fillet after that.”

That said, with this year’s runup in Bitcon’s price, there appears to be a lot of traders who may be eating fillet as the number of “millionaire addresses” is growing, according to a recent tweet from Glassnode, the on-chain market analysis company.

The data indicates that 10% or 1.85 million bitcoins in circulation hasn’t moved in over a decade, the tweet reports. Which means that traders who bought BTC more than 10 years ago at .08 USD per BTC are enjoying a very large profit.

HODler’s aren’t the only coin owners impacting the current supply of BTC in circulation.

“1.78 million bitcoins have never left their miner address,” Glassnode tweeted. “That is 9.5% of the circulating #Bitcoin supply. Our analysis shows that 98% of those coins were mined more than 7 years ago and 94% more than 10 years ago. Most could be lost forever.”

Bitcoins could be “lost” if a trader loses the private key, throw away or break a device on which the BTC data is stored, or even hardware failures. Lost coins can have an impact on the total supply that actual circulates.

In a November 2017 report by Fortune Magazine, Chainanalysis estimated “3.79 million bitcoins are already gone for good based on a high estimate—and 2.78 million based on a low one.” That’s 17% to 23% of existing bitcoins in 2017.

While those numbers seem staggering, there’s still plenty of Bitcoin in circulation and more to be mined.  So if you’re sitting on BTC, or sitting on the sidelines, know there’s a lot of runway left for this digital coin, even with its finite supply.  Whatever your strategy, the data suggests that Bitcoin has become an investment of choice, especially in these uncertain times.  Leave your FOMO behind and jump in.

Joyce Pavia Hanson