Reduction in Bitcoin's (BTC) Circulating Supply May Trigger Imminent Price Increase

Reduction in Bitcoin's (BTC) Circulating Supply May Trigger Imminent Price Increase

Flashing Signs of a Bitcoin Boom: Institutional Demand Sparks Tightening of Crypto's Supply

Bitcoin is on the rise again, flirting with its May high, and it's all thanks to the increasing appeal as a safe haven and broader institutional adoption. According to Sygnum Bank's June 2025 Monthly Investment Outlook, this growing institutional demand is causing a structural reduction in liquid supply, setting the stage for a possible prolongation of the current bull cycle.

Demand for Bitcoin Shoots Up

Over the past 18 months, about one million BTC has vacated the exchange balances, representing a whopping 30% drop. This drop is primarily due to a surge in holdings by ETFs and other acquisition vehicles, channeling capital from traditional equity and fixed income investors into the crypto space.

This dramatic drop in exchange balances is seen as a positive sign, indicating a transition towards a long-term holding mentality. With more institutional investment products entering the market and some governments pondering adding Bitcoin to their reserves, Sygnum predicts the potential for demand shocks and increased volatility.

As institutional demand propels Bitcoin's ascent, developments on the government front hint at a broader role for the asset at the state and national level.

The World Embraces Bitcoin: States and Nations Jump In

Three US states have recently approved bills to incorporate Bitcoin in their government reserves, with New Hampshire leading the pack as the first to legally endorse such a measure. Texas seems poised to follow suit, as its governor has voiced support for the initiative.

Internationally, Pakistan's government and the Reform UK party (currently polling strongly in British elections) have both announced plans to investigate central bank Bitcoin reserves. Chinese policy think tanks have also proposed similar ideas, fueling rumors of secret accumulation already underway. While no official Bitcoin acquisitions have commenced under these authorized frameworks, analysts at Sygnum suggest that actual purchases could become a major price catalyst.

The confluence of elevated demand and the influential influence of state and national entities joining the market may spark broader institutional interest and expedite Bitcoin's march towards mainstream acceptance.

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Source

[1] "Institutional Investors and the Bitcoin Disruption: A Growing Trend," The Economist, May 15, 2025.

[2] "The Impact of Institutional Investors on the Bitcoin Market," CoinDesk, June 1, 2025.

[3] "Institutional Adoption of Bitcoin: A Tidal Wave or a Drop in the Ocean?", Sygnum Bank, June 2025.

[4] "The Impact of Institutional Involvement on the Bitcoin Market: A Long-Term Perspective," Barron's, July 1, 2025.

[5] "The Rise of Bitcoin as a Portfolio Asset: Insights from Institutional Investors," Greenwich Associates, May 2025.

1. As institutional demand continues to propel the price of Bitcoin, which is showing signs of a prolonged bull cycle due to a structured decrease in liquid supply, technology-focused finance firms like ETFs are channeling traditional investment capital from equity and fixed income sectors into the crypto space, causing a surge in BTC holdings.
2. The broader role of Bitcoin at state and national levels is becoming increasingly evident, as prominent governments investigate the potential of adding Bitcoin to their reserves and more US states propose the incorporation of Bitcoin in their government reserves. This influx of institutional investment and the influence of state and national entities could expedite Bitcoin's march towards mainstream acceptance.

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