Bitcoin
Bitcoin Exchange Reserves Hit 3-Year Low Amid BTC Shortage
The world’s first cryptocurrency, Bitcoin, had its foreign exchange reserves reaching a three-year low of US$2,825,703 on June 19, 2024, compared to US$3,039,000 in January 2024.
The decrease in foreign exchange reserves or exchange balance as CryptoQuant Data indicates less selling pressure and supply-side shocks due to Bitcoin scarcity.
Bitcoin foreign exchange reserves chart – Source: CryptoQuant
This scenario has been significantly boosted by the approval of Bitcoin exchange-traded funds (ETFs) in the United States in January 2024. The world’s largest asset manager, BlackRock, has been acquiring Bitcoin through its iShares Bitcoin Trust (IBIT), which has approximately 274 thousand BTC as of June 6th.
Digital asset funds saw monthly inflows of US$2 billion in May 2024, mainly from Bitcoin-linked products, thus bringing the assets of global investment vehicles to almost US$73 billion.
However, a recent report from Coinshares revealed a significant occurrence. During the week beginning June 15, 2024, Bitcoin-linked investment products recorded weekly outflows of $621 million, the highest since March 2024.
This was due to “more aggressive than expected comments” from the Federal Reserve, which signaled that interest rates would rise, and as a result, people sold fixed supply assets, including Bitcoin.
However, these swings have caused many people, including Franklin Templeton CEO Jenny Johnson, to conclude that institutional adoption of Bitcoin is still in its infancy. Johnson said the current wave of adopters is the first wave and that the second wave of adopters will be larger institutions in the coming years.
Further, the supply side of Bitcoin is impacted by another halving that occurred in April 2024 and reduced the block mining reward from 6.25 to 3.125 Bitcoin per block. This also helps support the scarcity narrative, which could encourage more investors and institutions to buy Bitcoin.
Reducing foreign exchange reserves, increasing institutional interest, and supply-side factors such as halving events point to the changing environment for Bitcoin as a highly valued digital currency.
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