Bitcoin, founded over a decade ago, hails the flag of decentralization and cryptocurrency. Its native token, $BTC, holds more than 50% of the global market share in the segment of cryptocurrency. That is one precise factor that gives the network power to control the movement of an entire sphere. If the price of bitcoin rises, the market is bound to follow the trail. Similarly, if the Bitcoin price falls, then the market is likely to plummet, even if it happens for a few moments or days.
However, Bitcoin’s price depends on several factors, with circulating supply being one of them. It is backed by the fundamental principle of demand-supply, which, in fact, extends to every asset in the world.
Understanding Bitcoin’s Circulating Supply
One theory that explicitly relates to Bitcoin supply and demand is that supply and demand are pretty much the same as for any other asset in an economy. However, supply and price are driven by the concept of scarcity. Bitcoin supply is divided into Circulating Supply and Total Supply. The difference between circulating supply and total supply is the portion that is available in the market.
BTC’s circulating supply is 19,757,825 at the press time. These many Bitcoin tokens are available for trade. Total Supply is capped at 21,000,000. Thereby setting the maximum limit beyond which the ecosystem will not see tokens in circulation.
Factors that affect Bitcoin supply are market sentiments, regional regulations, mining costs, adoption, and competition in the crypto market. Interestingly, the supply of Bitcoin can be controlled by burning tokens or reducing mining rewards by half. The latter is known as Bitcoin Halving, and it last happened on April 20, 2024.
Relationship Between Bitcoin’s Price and Circulating Supply
There is an indirect relationship between Bitcoin price and circulating supply. The lower the supply, the higher the price of Bitcoin goes. It is backed by the idea that anything that exists in scarcity is sold for a high price, almost similar to a luxurious item. There is an underlying requirement of having basic utility in the real world or within the ecosystem from which holders can derive profits.
Does circulating supply affect the crypto price? It does, and price also affects the crypto supply. A steep decline in the price of BTC forces the community to contemplate burning a portion of the supply. This leads to a reduction in the same – thereby inflating its price reasonably.
Impact of Bitcoin Price on Supply
The higher the price, the lower the supply of bitcoin. Either of these can be due to multiple external reasons. Leading that pack is often the price of the flagship cryptocurrency. The most recent example of a rate cut makes this evident.
Impact of Circulating Supply on Price Movement
There is sufficient impact of market trends on supply and demand. However, there is also a scenario where circulating supply affects price movement. Prices are bound to form a declining pattern on the chart if BTC’s supply is in abundance.
Current State of Bitcoin Supply and Its Influence
Bitcoin circulating supply also has a state that is determined by improvements in mining efficiency and future projections. It currently represents 94.08% of the total supply. Chances are it could be increased to the maximum limit of 21,000,000 BTC. The correlation between them rather encourages investments in mining technology. It, in turn, results in an augmented rate of new tokens making their way into the market.
There remains a tangible effect of Bitcoin supply on price – so much so that it has facilitated research into crafting strategies for Bitcoin investments accordingly. The number of coins is likely to affect its market value in every possible phase.
Future Projections for Bitcoin Price and Supply
The future projections of BTC prices are bullish, with the nearest possibility of $80,000 by the end of October 2024. Bitcoin price trends support the thesis that the price surges every time mining rewards are halved every four years. Bitcoin price prediction speculates a rise to $116,314 by the end of this year, or at least breach the market of $100,000. That will pave the way for another uptick to $178,394 by the end of the next year, or $200,000 per market sentiment.
The supply of BTC is likely to remain roughly the same. Any movement on the graph and Bitcoin will behave according to the basic economic principle. That said, mere anticipation is also likely to cause fluctuations. This is similar to how speculation of a rate cut influenced its price days before the announcement was officially made.
Final Thoughts
There is a core Bitcoin price and circulation supply relation in the play. It forms on the principle of scarcity and is impacted by multiple factors like liquidity, adoption, and mining technology advancement. It is crucial to understand the relationship between them, especially for investors and market analysts. Bitcoin price affects token supply, and token supply similarly affects Bitcoin price. BTC’s price, with an exception, could be affected by a larger number of factors.
