Insights: Here’s why Bitcoin’s available supply is far lower than most realise

Bitcoin’s value comes from how limited it is. There will only ever be 21 million coins, and almost 20 million have already been created. As this number edges closer to the limit, the world’s leading digital asset is moving into a new chapter, one shaped by true scarcity.

Big investors are taking millions of Bitcoins out of circulation, while millions more are sitting unused or have been lost over time. This growing shortage could turn out to be one of the most important supply squeezes in Bitcoin’s history, shaping the future of the network.

A supply squeeze happens when lots of people want an asset, but there’s only a limited amount available. In regular markets, this can cause prices of stocks or commodities to jump. In the case of Bitcoin, because of its fixed supply, the effect can be even more potent.

Producing more of it, or manipulating it, to meet growing demand is not possible. Unlike fiat currencies and physical commodities, there is no central authority, and after the cap is reached, no new supply will ever enter the market.

While it is this fixed supply structure which gives Bitcoin its appeal as “digital gold”, it also paves the way for extreme scarcity, especially when most of the remaining Bitcoin is being secured up by long-term holders and institutional investors.

Of the nearly 20 million Bitcoins that have already been mined, not all of them can be accessed, with chain analysis and blockchain forensics estimating that 18 per cent are dormant, and probably lost, after not moving in years.

They may have been linked to wallets from the early days when Bitcoin was worth little, security protocols were primitive, and private keys were often stored on unencrypted hard drives, which were later lost, destroyed, or thrown away.

In one such well-documented case, an IT worker from Newport, Wales, unintentionally dumped his hard drive holding 7,500 BTC in a landfill site. In many other cases, the owners have since passed away or forgotten their access credentials entirely.

As a result, the amount of Bitcoin that is actually available to be bought or sold today is far smaller than the headline numbers suggest, with some estimates putting the current supply circulating at less than six million coins.

The Bitcoin market is changing

Once dominated by retail traders, the Bitcoin market has changed, with institutional entities, from asset managers to publicly traded companies, now acquiring Bitcoin to hold it in long-term custody rather than trade it.

A structural shift has arrived with the rise of spot Bitcoin ETFs in the US and other regions. As these funds must hold underlying BTC in cold storage to back each issued share, that Bitcoin isn’t traded or put back into the market, effectively taking it out of circulation.

Increasingly, corporate treasuries, family offices, and high-net-worth individuals are holding Bitcoin as a store of value in their accounts. With institutional demand rising, a big part of the already limited supply is locked away and won’t be traded.

Meanwhile, banks and governments are emerging as long-term Bitcoin holders. Now offering Bitcoin custody services, major banks are allowing clients to buy and store BTC directly within traditional financial institutions.

Although the client officially owns the Bitcoin, it’s kept in secure institutional storage, making it hard to move and encouraging long-term holding.

Governments are stepping in too. El Salvador made Bitcoin legal money and added it to its national reserves, and other countries are looking at similar moves. As governments treat Bitcoin as a strategic asset, even less may be available for the market.

These buyers have plenty of money and think long-term. They aren’t looking to trade; their goal is simply to hold and preserve value.

Unlike in the past, today’s demand is coming from regulated institutions, governments, and professional asset managers with long-term plans. This time, the way people are buying Bitcoin is different.

Banks, pension funds, insurance companies, sovereign wealth funds, and other asset managers are taking a bigger role in Bitcoin. They often plan to hold it for decades, and once Bitcoin is in their hands, it almost never comes back onto the market.

These shifts in who owns Bitcoin are important. When coins don’t move, the market becomes smaller and less liquid. That means even small increases in demand can push prices up sharply. With so much Bitcoin being held long-term, we might already be in the early stages of a lasting supply squeeze.

With dormant coins, institutional holdings, ETFs, government reserves, and long-term retail owners, the amount of Bitcoin you can actually buy is shrinking quickly. This isn’t just market cycles or sentiment – it’s a real, structural change in how Bitcoin is used, held, and valued.

Bitcoin is shifting from a speculative investment to a store of value. Each coin that gets locked away makes this trend stronger. For anyone following the supply, it’s clear: the supply squeeze isn’t coming, it’s already happening.

The writer is the founder and executive president of GDA.

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