Bitcoin Supply Shortage Is Better for Crypto Investors

Bitcoin Supply Shortage Is Better for Crypto Investors

The chaotic political situation in the United States has led the Federal Reserve (Fed) to print more money, thereby pushing up the prices of other assets, according to an article published yesterday by blockchain investment fund Pantera Capital.

One of those assets is Bitcoin, whose price is surging thanks to tech companies buying large amounts of the cryptocurrency.

“PayPal and Cash App have already purchased over 100% of all newly issued Bitcoin,” the article said. “When other large financial institutions follow suit, the supply shortage will become even more unbalanced. The only way for supply and demand to balance is for prices to rise.”

With big tech companies snapping up so much Bitcoin, the price can only go up, but will this make cryptocurrency inaccessible to regular people who don’t have millions of dollars to buy it?

According to Pantera Capital, a Bitcoin shortage is possible. However, rest assured there is nothing to worry about.

Pedro Freiro, co-founder of Crypto Nerd Academy and an analyst at Quantum Economics, said the concentration of bitcoin in the hands of fewer people or institutions could be a “matter of democratization of finance” in the long term.

Although he added that the supply of Bitcoin is limited and eventually big companies will need to sell it. But we should not forget that not all Bitcoin is just 'held. ”

Research from blockchain analytics firm Chainalysis last week showed that the amount of bitcoin available for purchase depends on whether the person holding that bitcoin wants to sell or trade it.

Of all the 14.8 million mined Bitcoins, approximately 77% are sitting in illiquid wallets (wallets that don’t send large amounts of Bitcoin, but rather hold Bitcoin). This suggests that large buyers are essentially snapping up assets and watching their value grow without selling. This isn’t necessarily a bad thing.

“Large tech institutions owning large amounts of Bitcoin and holding onto it only improves the underlying security of the network, further increasing the store of value,” said Sean Dexter, a decentralized finance analyst at Quantum Economics.

He also said that regardless of the price of the currency, "having the option to buy an asset where inflation cannot be unilaterally determined by any one force is a form of democratization" and people can still use it as a store of value.

He added: “Basically, Bitcoin will eventually find an equilibrium, maybe the price is high, maybe institutions hold a lot of it. But it doesn’t matter because the average person will still be able to buy $100,000 worth of Bitcoin at any price.”

If things stay the same, the price of Bitcoin will continue to rise. But there’s no need to worry about the currency disappearing: With companies like PayPal buying into it, it’s easier than ever to buy cryptocurrency.

As Pantera Capital said in the post: “Previously, buying Bitcoin was very frictionless: taking a photo with your passport, waiting several days to a week for activation, and having daily limits.”

“300 million people have just acquired Bitcoin, and Ethereum and other cryptocurrencies will soon be introduced to people.”

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