the supply of Bitcoin on exchanges and OTC desks
has been on a steep decline at the same time the demand for Bitcoin by investors who are
bullish like Strategy has continued to rise now many believe that this sets the stage
for the so-called supply crunch wherein a shortage of available Bitcoin causes its price to
go parabolic as big buyers continue to accumulate and that’s why today we’re going to explain
exactly what a supply crunch is and examine how likely it is to happen when it could happen
and how it could affect the Bitcoin price and the broader crypto market my name is Nick stay tuned
in case you missed it a supply crunch is when the supply of an asset starts to decline while the
demand stays the same or even increases causing the price to spike and this is why a supply crunch
is also sometimes referred to as a supply shortage or a supply squeeze and it’s actually something
that’s happened before if you watched our recent video about the silver market you’ll know that it
experienced a supply crunch in the 1980s the TLDDR is that three billionaire brothers called the Hunt
brothers accumulated close to onethird of silver’s liquid supply causing its price to pump when other
investors started piling in silver went parabolic believe it or not but we’re seeing almost the
exact same thing happening today with Bitcoin according to the Bitcoin Treasury’s website ETFs
countries public companies private companies Bitcoin miners and DeFi protocols collectively
hold more than 15% of Bitcoin’s total supply of 21 million which is pretty wild when you think
about it the craziest part is that just like silver during the 1980s not all of the Bitcoin
in circulation today is liquid in plain English not all the Bitcoin in circulation is tradable
for starters only around 20 of the 21 million Bitcoin are in actual circulation and another
4 to 6 million Bitcoin are estimated to be lost or otherwise inaccessible what this means is that
there’s only 14 million Bitcoin that’s technically in circulation now for context ETFs countries
public companies and others hold just over 3.2 million Bitcoin to be on par with the Hunt
brothers in the 1980s they would need to purchase another 1 million Bitcoin to control onethird
of the supply however it’s possible that this threshold has already been exceeded according to
Glass Node only around 5 million Bitcoin is liquid or highly liquid with the rest being illquid
either because it’s been lost or because it’s been huddled in theory this means that ETFs countries
etc etc hold 2/3 of Bitcoin’s liquid supply yet in practice one could argue that the Bitcoin
held by spot Bitcoin ETFs also counts as being liquid simply because we’ve seen the ETFs buy or
sell Bitcoin based on market conditions one could even argue that the Bitcoin held by governments
is also mostly liquid uh just because we’ve already seen some governments dump their Bitcoin
Germany however even if we do assume that most of the Bitcoin held by ETFs and countries is liquid
public companies private companies Bitcoin miners and DY protocol still collectively hold close to
1.5 million Bitcoin and counting not only that but many of these entities continue to buy and hodddle
Bitcoin lo and behold 1.5 million Bitcoin works out to 1/3 of Bitcoin’s liquid supply in other
words no matter how you slice it it looks like Bitcoin is on track to experience a supply crunch
that could send its price parabolic in the coming months like silver in the 1980s the only questions
are when and how much could it rally by my only the Bitcoin supply crunch could happen and how
high the Bitcoin price could go there’s a bigger question we need to address and that’s why it
hasn’t happened already after all public companies have been buying billions in Bitcoin so uh why
hasn’t BTC pumped more the answer is interesting it’s essentially because of the disconnect between
the big buyers and the sellers of this Bitcoin you see most large Bitcoin buys take place over
the counter or OTC for example Strategy will buy 1,000 Bitcoin directly from a crypto exchange
like Coinbase rather than on the open market the fact that this purchase takes place directly
between two entities means that the direct impact on Bitcoin’s price is minimal to be clear
these purchases still have an indirect impact especially as these counterparties in these large
OTC sales start buying Bitcoin on the open market to satisfy that demand as it so happens it
looks like this could start happening more and more and that’s because the supply of Bitcoin
on OTC desks is at its lowest level in years and that’s at least according to the OTC desk
glass node could identify it’s worth keeping in mind that the entire OTC market can be opaque so
it’s hard to track onchain even so this doesn’t change the fact that the onchain indicators
tracking supply of Bitcoin on OTC desks are likely directionally correct in other words the
OTC supply could be higher than meets the eye but it doesn’t change the fact that this supply is on
the decline in case it wasn’t clear enough this decline in OTC supply will force OTC desks to buy
Bitcoin on the open market and that of course will push up its price it’s also worth noting that the
main reason why the supply of Bitcoin on OTC desks has been declining is because Bitcoin miners
have adopted a huddle strategy in recent years logically large Bitcoin miners are the largest
source of new Bitcoin supply the fact that many of them have decided to hodddle rather than sell
their mind Bitcoin has therefore significantly restricted Bitcoin’s available supply but that’s
just the OTC side of the story to quickly recap most Bitcoin buys have been happening OTC which
has a minimal direct impact on Bitcoin’s price meanwhile lots of long-term Bitcoin holders have
been selling Bitcoin on the spot market notably this spot selling has been high ever since Bitcoin
hit the $100,000 mark and this is not surprising given that 100K is a key psychological level
that many long-term holders have probably had in mind for years the result is that they’ve been
consistently taking profits around the 100K level partially through the spot markets and unlike the
OTC buys these spot sales have directly impacted Bitcoin’s price specifically spot Bitcoin sales
by long-term holders have been suppressing its price which is something that almost everyone has
noticed every time Bitcoin rallies up towards 100K it struggles to get above that level no matter
how much strategy buys OTC because Bitcoin Wales are selling on the spot the silver lining pun
intended is that the supply of Bitcoin held by Wales has been on a sharp decline over the last
6 months or so it’s impossible to know when their spot selling will stop but the spot selling is
slowing and the trend in OTC balances suggests more spot buys are coming and if you’re looking to
trade Bitcoin or are trading Bitcoin already then could Bitcoin supply crunch occur and how high
could BTC’s price go the answer to the former ultimately depends on how much investors
are willing to huddle Bitcoin as its price continues to climb in other words Bitcoin supply
crunch depends mainly on hodlers not fee buyers or sellers per se in turn the willingness of
investors to hodddle Bitcoin fundamentally depends on whether they see it as a risk asset or a safe
haven right now most investors still see Bitcoin as a risk asset but more and more are starting
to see it as a safe haven particularly after it temporarily decoupled from stocks after the tariff
kurfuffle and if you watched our video about Bitcoin’s decoupling you’ll know we underscored
the fact that most investors will only see Bitcoin as a safe haven asset once there’s something that
makes them believe this for example a central bank announcing that it’s holding Bitcoin which
could happen in the coming months alternatively the catalyst that makes investors see Bitcoin as
a safe haven asset could be as straightforward as Bitcoin decoupling from stocks for a sustained
period of time something that could also happen again in the coming months and this would make
ETFs countries and other large Bitcoin holders much less likely to sell even if this catalyst
never comes along the fact of the matter is that more and more of Bitcoin supply is flowing from
the weak hands to the diamond hands and this means that there’s less and less liquid Bitcoin and that
means that a supply crunch is likely inevitable regardless of what happens in the coming months
now the answer to the latter question is truly fascinating because the silver supply squeeze of
the 1980s gives us a sense of how high Bitcoin could go if it experiences a supply squeeze of
its own the reason why this is so fascinating is because prior to the supply squeeze silver
followed a regular cycle of its own as you can see silver had a six-year cycle throughout the
1960s and 70s you’ll notice that there were three cycles in total and that the third time silver
retested that long-term resistance trend line it went parabolic as you might have guessed that
parabolic move was driven by a silver squeeze if you look at Bitcoin you’ll notice that there have
also been three cycles in the 2010s and 2020s the difference is that these cycles are four years
instead of 6 years the similarity is that Bitcoin is likewise retesting a long-term resistance trend
line and this is effectively happening at the time of making this video at first glance you might
think “Hey history is unlikely to repeat and that it’s unlikely that Bitcoin will go parabolic
if it manages to break above this long-term trend line.” Upon closer inspection however you
realize that this is more likely than meets the eye and not just because of the similarities in
supply as we’ve learned many consider Bitcoin to be a digital gold with a higher volatility in
practical terms this means that they see Bitcoin as a higher risk higher reward bet on gold what
was that historically that’s right silver so even though Bitcoin’s narrative is digital gold
investors treat it more like a digital silver to put things into perspective silver pumped by
more than four times after it broke above that long-term resistance trend line in its third cycle
thanks to the supply crunch but before you get too excited it’s important to note that Silver’s
market cap back then was much smaller than Bitcoins is today based on our research Silver’s
market cap was roughly $1 trillion in 2025 before it went parabolic meaning its market cap grew from
1 trillion to 4 trillion if we assume that Bitcoin follows silver in market cap then a $4 trillion
market cap would translate to a Bitcoin price of somewhere around $200,000 there are just two
important things to note however the first is that this assumes that Bitcoin experiences a supply
crunch which is by no means guaranteed the second is that investors are likely to take profits ahead
of 200K and that’s just because it’s another key psychological level meaning Bitcoin could top
somewhere around 180K conversely Wales could push Bitcoin’s price above 200K to suck in investors
looking for that 300K plus level and this brings me to the question of how a Bitcoin supply
squeeze could affect the broader crypto market in this case the answer depends on how much of this
Bitcoin gets used as collateral for borrowing in CFI and D5 now to bring you up to speed the amount
of wrapped Bitcoin has been growing exponentially you’ll recall that almost 170,000 BTC are held in
D5 protocols now for reference that’s around 0.8% 8% of BTC’s supply and it’s not far off from how
much BTC was wrapped at the peak of the previous bull market obviously most of this wrapped BTC is
being used as collateral in DeFi holders are using this Bitcoin as collateral to borrow stable coins
usually to invest in other cryptos aka altcoins and if you watched our video about wrapped
Bitcoin you’ll know that we estimated that we could see up to 1 million BTC wrapped on various
chains in this cycle assuming a Bitcoin price of over $100,000 or more that could work out to a
whopping $100 billion of BTC or more being used as collateral in turn this could translate into
tens of billions of dollars of stable coins being borrowed and invested into altcoins notably
both of these figures could be much higher if more investors start seeing Bitcoin as a safe
haven asset and the result would be more and more people using Bitcoin as collateral in this manner
after all why would you sell your Bitcoin if it was being accumulated by central banks and held
by governments it would make more sense to borrow against it if you need extra money and if you’re
a Bitcoin maxi maybe you’ll use this Bitcoin to borrow even more to buy more Bitcoin pushing its
price up even further all this would do is further increase the amount of crypto native liquidity
and the secondary effects of this could be quite profound i suppose that rap Bitcoin holders use
their Bitcoin collateral to borrow stable coins and buy ETH this would cause ETH’s price to
rise and that would of course deter Ethereum maxis from selling ETH and motivate them to use
it as collateral in DeFi borrowing stables against their ETH in some a supply squeeze would result
in an increase in cryptonative liquidity due to the positive impact it would have on Bitcoin’s
price and the increased amount of borrowing that would occur against Bitcoin as a result and this
could cause many cryptos to experience parabolic moves of their own but of course none of this is
sustainable eventually someone will start selling Bitcoin and a low supply of liquid Bitcoin means
that this sell pressure would have an outsized impact on price on the way down just like the
buying pressure on the way up and this would trigger liquidations in DeFi and CFI as well as
on exchanges where traders who went long would get liquidated pushing prices down further because
most crypto investors see Bitcoin as a safe haven many would begin selling their other altcoins
and rotate into Bitcoin both out of caution and to stack more SATs this would likewise result in a
wave of liquidations in DeFi CFI and on exchanges as those who went long ETH Soul and other cryptos
used as collateral get wrecked all the while the supply of stable coins would contract massively as
people cash out and this would force stable coin issuers to sell the collateral back in the stable
coin tokens which is mostly US government debt i.e us bonds and because US bonds are the backbone
of the financial system a massive sell-off in US bonds to meet stable coin redemptions could create
broader financial instability if this somehow triggers a major stable coin to DPEG it could
amplify the liquidationdriven crypto crash believe it or not but this wouldn’t be that different from
what happened to silver after the 1980s squeeze the catalyst that caused silver to collapse was
a change to rules around purchasing commodities using leverage because the Hunt brothers had
financed most of their silver purchases using leverage silver crashed on the realization that
they could no longer buy and eventually they got liquidated although silver did rally later in
1980 it didn’t come close to its all-time high of just under $50 and has yet to reclaim that
all-time high more than five decades later in retrospect it’s easy to see why the leverage
mechanisms that allowed silver to rally so much were practically made off limits fast forward
to today and it’s easy to see how history could repeat again with Bitcoin we could see a massive
meltup to an unprecedented all-time high because of a supply shock only to see Bitcoin failed to
reclaim this new epic high for years possibly decades again this would just be because the same
leverage mechanisms that made this massive rally possible would be made off limits while there’s
no guarantee that we would see the same kind of restrictions on Bitcoin leverage like we did with
silver in the 1980s it’s almost guaranteed that traders and investors would be aware of these
dynamics put differently they would know when entities are starting to take on unsustainable
amounts of debt to buy Bitcoin and they would try and liquidate these entities to make a profit
shorting BTC similarly investors would be unlikely to buy the debt being issued because they know
how the story would end and this would make it very hard to see a repeat of what we’re seeing
today like publicly traded companies issuing billions of dollars of debt or shares to buy
Bitcoin using all kinds of financial magic and that reminds me I’d be remiss if I didn’t
mention an intriguing possibility that some Bitcoin analysts have raised and that’s that
publicly traded companies are pulling forward the effects of Bitcoin’s future hings and this is
because they’re literally restricting the supply of newly mined Bitcoin like the hing effectively
does if this is correct then it stands to reason that this is also pulling forward the effects that
future hoverings would have on Bitcoin’s price and result in the dynamic I just mentioned bitcoin
rallies way more than expected in this cycle because of the supply crunch and rallies less
in the next cycle both because the same amounts of leverage demand won’t be possible and because
the supply effects were pulled forward with all that said though the bigger and more imminent
risk to Bitcoin is a potential fork resulting from something like a quantum computing threat
and you can learn more about that in our video right over here and if you’re not subscribed to
the channel yet you can do that right over here this is me Nick signing off thank you very
much for watching and I’ll see you again soon
