Bitcoin (BTC) is the first and most dominant cryptocurrency in the world, with a market capitalization of over $1 trillion and a share of over 40% of the total crypto market. However, not all Bitcoin is created equal, as there are different ways of holding and storing the digital asset.
One way of holding Bitcoin is through custodial services, such as exchanges, ETFs, and trusts, which offer convenience, liquidity, and accessibility to investors and traders. However, this also means that the Bitcoin is not under the direct control of the owner, but rather the custodian, who issues a paper claim or a certificate to represent the ownership of the Bitcoin. This paper claim can be traded, sold, or redeemed, but it is not the same as the actual Bitcoin on the blockchain. This is what we call the paper supply of Bitcoin.
Another way of holding Bitcoin is through self-custody or cold storage, which means that the owner has full control and access to their private keys and Bitcoin on the blockchain. This requires more technical knowledge, security, and responsibility, but it also ensures that the owner has the true ownership and sovereignty of their Bitcoin. This is what we call the physical supply of Bitcoin.
The paper supply and the physical supply of Bitcoin have different implications for the price and the market of the cryptocurrency. As the paper supply increases, it means that more Bitcoin is being held in custodial services, indicating a higher selling pressure and a lower scarcity. This could be a bearish sign for Bitcoin price, as it shows a weak demand and interest for the leading cryptocurrency.
On the other hand, as the paper supply decreases, it means that more Bitcoin is being moved to self-custody or cold storage, indicating a lower selling pressure and a higher scarcity. This could be a bullish sign for Bitcoin price, as it shows a strong demand and interest for the leading cryptocurrency.
According to Willy Woo, an on-chain analyst, the paper supply of Bitcoin has been declining significantly in the past few months, while the physical supply of Bitcoin has been increasing. He shared a chart showing the events that could drive the price of Bitcoin even higher. He wrote:
“Paper Bitcoin” dropping is bullish for prices. Woo pointed to […] Source: Willy Woo
According to the chart, the paper supply of Bitcoin has dropped by 16% since March 2020, while the physical supply of Bitcoin has increased by 10%. This means that more Bitcoin is being withdrawn from custodial services and moved to self-custody or cold storage, creating a supply shock and a scarcity effect.
Woo pointed to several factors that contributed to this trend, such as:
- The approval of spot Bitcoin ETFs in the United States, which allow investors to buy and sell actual Bitcoin on the blockchain, rather than paper claims or certificates. This creates a new and steady demand source for Bitcoin, as well as a reduced supply source, as the ETFs have to buy and hold Bitcoin in order to back their shares.
- The adoption of Bitcoin by institutional investors, such as MicroStrategy, Tesla, and Square, which have bought and held large amounts of Bitcoin on their balance sheets, rather than on exchanges or trusts. This creates a long-term and strategic demand for Bitcoin, as well as a reduced supply, as these investors are unlikely to sell their Bitcoin in the short term.
- The innovation and development of Bitcoin, such as the Taproot upgrade, the Lightning Network, and the ordinal inscriptions, which enhance the scalability, efficiency, and functionality of the network. This creates a new and diverse use case for Bitcoin, such as NFTs, DeFi, and smart contracts, as well as a increased value for the network, as more users and developers join and participate.
Bitcoin’s price prediction for the future is hard to make, as it depends on many factors, such as the market sentiment, the community support, the innovation and development, and the competition and regulation. However, some analysts and experts have given their opinions and forecasts, based on technical analysis, historical trends, and fundamental factors.
According to Cryptonews, Bitcoin’s price could reach $100,000 by the end of 2024, based on the Fibonacci extension tool, which shows a possible rally to $85,000 in the short term, followed by a pullback and a surge. The article also cites the bullish performance of Bitcoin and Ethereum, as well as the strong demand and interest for Bitcoin, as positive indicators for Bitcoin’s growth.
According to Techopedia, Bitcoin’s price could reach $200,000 by 2025 and $300,000 by 2030, based on a logarithmic regression model, which extrapolates the past price movements and trends into the future. The article also mentions the loyal and active fan base, the innovative and scalable technology, and the potential listing on more exchanges, as favorable factors for Bitcoin’s appreciation.
According to Coinpedia, Bitcoin’s price could reach $120,000 by the end of 2023, based on a chart analysis, which suggests a bullish continuation pattern, possibly involving a breakout above the $100,000 resistance level. The article also refers to the endorsement of Bitcoin by some influential figures in the crypto community, such as Elon Musk and Michael Saylor, as well as the integration of Bitcoin with various dApps and DeFi platforms, as bullish signals for Bitcoin’s rally.
According to FXStreet, Bitcoin’s price could reach $130,000 by the end of 2024, based on the Relative Strength Index (RSI), which indicates that Bitcoin is still in an uptrend and could extend the gains 10% to reclaim the $117,000 all-time high. The article also points out the Bitcoin’s outperformance of the crypto market, as well as the psychological level of $100,000, as possible targets for Bitcoin’s breakout.
In conclusion, Bitcoin paper supply refers to the amount of Bitcoin that is held in custodial services, such as exchanges, ETFs, and trusts. As the paper supply decreases, it means that more Bitcoin is being moved to self-custody or cold storage, indicating a lower selling pressure and a higher scarcity. This could be a bullish sign for Bitcoin price, as it shows a strong demand and interest for the leading cryptocurrency.
