Surging Bitcoin ETF Demand: Is Mining Capacity Enough to Keep Up?

Spot bitcoin ETFs launched in the U.S. in January 2024, raising significant questions about demand as ETF issuers began to surpass mining supply. Over the past 18 months, the demand for ETFs has consistently outpaced the supply of bitcoin mined, a trend that has re-emerged following the recent bitcoin halving, which reduced miners’ rewards.

Bitcoin ETF Demand Could Lift BRRR, Rivals

Amid a renewed rally in the largest cryptocurrency, investors and advisors are flocking to ETFs like the CoinShares Valkyrie Bitcoin Fund (BRRR). Last week alone, ETFs such as BRRR acquired 18,644 BTC, approximately six times the amount mined by miners, according to HODL15 Capital.

Recent hash rate data indicates that miners, including those in the CoinShares Valkyrie Bitcoin Miners ETF (WGMI), are ramping up activity to take advantage of rising prices. Yet, there is a limit to their output. On days when bitcoin ETFs are major buyers, the demand often exceeds what miners can produce.

“Daily production hovers around 450 BTC. Thus, institutions have absorbed the equivalent of more than 40 days of mining. This phenomenon marks a major shift, revealing that investor appetite in the spot market now exceeds the capacity to create new coins,” reported Coin Tribune.

The trend of ETFs consuming more bitcoin appears to be stable. As noted by Farside Investors, funds have been significant buyers in recent days, with April 30 being the only day they experienced outflows over the past week. Identifying days when funds like BRRR have been net sellers is nearly impossible since mid-April.

For investors looking to gauge the future for BRRR and similar ETFs regarding price action, it simply involves tracking spot bitcoin prices. As these prices rise, ETF holders are likely to increase their investments.

“This acceleration coincides with a surge in the bitcoin price. In early May, BTC rose 4% to reach $97,700, before settling back around $94,000. With supply remaining limited, each new demand drives prices higher, intensifying the tension between demand and production,” according to Coin Tribune.

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