Bitcoin's supply dynamics are undergoing a significant shift in 2025, with increasing indications that demand, even from retail investors, is outpacing the available supply. This phenomenon is driven by several factors, including increased institutional adoption, the diminishing rate of new Bitcoin entering circulation, and the tendency of long-term holders to HODL.

Analysts at Bitfinex have reported that demand from retail and mid-sized Bitcoin investors is exceeding the monthly issuance rate of Bitcoin. This level of accumulation, according to Bitfinex, supports the bullish narrative that new buyers entering the Bitcoin market are "price-agnostic buyers". This suggests that these investors are less concerned with short-term price fluctuations and more focused on the long-term value proposition of Bitcoin.

Several factors contribute to this supply-demand imbalance. Bitcoin's fixed supply of 21 million coins is a key element. By mid-2025, approximately 93% of all Bitcoin has already been mined, leaving less than 1.4 million BTC yet to be created. The Bitcoin halving, which occurs roughly every four years and reduces the number of new coins miners receive for validating blocks, further constricts the supply. The most recent halving in April 2024 reduced the block reward to 3.125 BTC, resulting in a Bitcoin inflation rate of less than 1% per year. As of June 2025, daily Bitcoin issuance is around 450 BTC.

Concurrently, long-term holders are holding onto their Bitcoin. Approximately 70% of the Bitcoin supply hasn't moved in at least a year, indicating that liquidity is drying up. A growing share of Bitcoin is locked in cold storage, tied up in institutional holdings, or presumed lost. As of June 8, 2025, Bitcoin's "ancient supply"—coins that haven't moved for 10 years or more—accounts for over 17% of the total issued supply. This "ancient supply" is growing faster than the new supply being issued, further exacerbating the scarcity.

The rise of institutional investment in Bitcoin, particularly through spot Bitcoin ETFs, has significantly impacted supply dynamics. These ETFs have absorbed substantial volumes of BTC. BlackRock's IBIT ETF, for example, reached $80 billion in assets under management faster than any ETF in history. As of mid-2025, MicroStrategy holds more than 2.75% of the total Bitcoin supply (approximately 582,000 BTC) and continues to buy more every month. Other companies are also adding Bitcoin to their balance sheets, further reducing the available supply.

The shrinking supply of Bitcoin, coupled with sustained or increasing demand, could lead to a "supply shock," potentially driving prices higher. Some analysts predict that Bitcoin could reach $200,000 by the end of 2025. However, a Bitcoin liquidity crisis can occur when a significant portion of the supply is held offline, in cold wallets or ETFs, rendering trading inefficient. As of early June 2025, the share of Bitcoin on exchanges has dipped below 11% of the total supply, the lowest level since early 2018, creating a "dry market" prone to larger price swings.

While some sources indicate a softening of retail flows into Bitcoin ETFs, others suggest that retail investors remain bullish on Bitcoin, viewing dips as buying opportunities and anticipating further price appreciation. The democratization of information and the increasing accessibility of cryptocurrency investments through user-friendly platforms have empowered retail investors to participate more actively in the market.

Overall, the dynamics of Bitcoin supply and demand in 2025 point towards a potentially significant shift. The combination of reduced supply growth, increasing institutional and retail demand, and the tendency of long-term holders to hold could create a supply squeeze, potentially leading to further price appreciation and increased volatility.