Bitcoin is showing strong signs of entering a deflationary trend, driven largely by the growing dominance of institutional investors. According to Ki Young Ju, CEO and Co-founder of CryptoQuant, this deflation is becoming more pronounced due to major holders like Strategy₿ locking away massive amounts of BTC with no intent to sell.
Institutional Holdings Tighten Bitcoin Supply
One of the biggest contributors to this deflationary movement is Strategy₿, a significant player that currently holds over 555,000 BTC. This stash is effectively removed from circulation, tightening the available supply of Bitcoin on the open market. As more institutions adopt a long-term holding strategy, fewer coins are available for trading, driving scarcity.
At the same time, companies like MicroStrategy (MSTR) are purchasing Bitcoin at a pace that exceeds the rate at which new BTC is mined. This imbalance has led to an estimated annual deflation rate of around -2.23%, further decreasing the effective supply in circulation.
Rising Demand Meets Shrinking Supply
This shrinking supply, paired with increasing demand from institutional investors, is creating a powerful market dynamic. As more firms add Bitcoin to their balance sheets and hold it for the long term, the available supply continues to drop. Other institutional holders are likely playing a similar role, amplifying the deflationary effect.
This trend is widely viewed as bullish for Bitcoin in the long run. With supply tightening and demand rising, market analysts expect continued upward pressure on price. If the current buying momentum continues, Bitcoin could see sustained growth as it becomes an increasingly scarce digital asset.
