Bitcoin’s Illiquidity Rises as Ancient Supply Outpaces New Issuance

Key Takeaways

The number of Bitcoin held for over 10 years is increasing faster than new coins are mined—550 BTC/day versus 450 issued BTC/day.
17% of BTC is already considered illiquid, with projections suggesting up to 30% illiquidity could be reached by 2026.

Finding Cause

Fidelity Digital Assets has released a report highlighting a pivotal shift in Bitcoin’s supply dynamics following the 2024 halving.

According to the findings, ancient Bitcoin—coins held for 10 years or more—is surpassing new issuance. Currently, 550 BTC enter the long-term holding category daily, compared to 450 new BTC being created per day.

Bitcoin Daily Issuance vs Daily Ancient Supply Growth. Source: Fidelity Digital Assets

This trend, alongside steady purchasing from institutional investors, forms the basis for analyzing potential future price movements.

The Convergence of Accumulation and Scarcity

The current amount of Bitcoin held for over a decade exceeds 17% of the total issuance (3.4 million BTC). Calculated at an approximate $360 billion valuation based on $107,000/BTC price, this signifies strong conviction among holders. Daily reductions in this long-term supply occur less than 3% of the time.

Ancient Supply Growth for Bitcoin. Source: Fidelity Digital Assets

Fidelity projects this portion could rise to 20% by 2028 and 25% by 2034, effectively tightening the available supply pool.

Institutional Adoption Accelerating

Institutional investor capital is described as accelerating. Analysis from Bitwise suggests Bitcoin inflows could reach $120 billion by 2025 and $300 billion by 2026 in a base case scenario.

Various entities are driving this influx: nation-states potentially reallocating a small fraction of gold reserves, US states adopting Bitcoin gradually, wealth management platforms incorporating a tiny percentage, and public companies significantly increasing their holdings.

Estimates suggest inflows could surpass $426 billion in an optimistic scenario, representing over 4 million Bitcoin (roughly 19% of supply) entering the long-term category, further exacerbating potential liquidity constraints.

BTC to $1 Million: A Supply-Demand Thesis

The prospect of Bitcoin reaching $1 million is discussed primarily through the lens of differing supply and demand dynamics.

A $1M price target implies a market capitalization exceeding $21 trillion—a tenfold increase from current levels relative to the eventual total supply. The report posits that the combination of a fixed, predetermined total Bitcoin supply (21 million) and increasing illiquidity could fuel such a significant milestone.

Historical Bitcoin rallies following halving events (2013, 2017, 2021, 2024) are often attributed to periods of reduced supply growth (halving) coinciding with rising demand, suggesting a potential pattern that could be repeated again.

Challenges & Counterbalancing Factors

While illiquidity increases are emphasized, the report also acknowledges potential catalysts for supply increases.

Notably, the existence of year-to-day fluctuations, such as the supposed occurrence of increased ancient Bitcoin supply removals following the 2024 US election, suggests volatility can trigger withdrawals from long-term positions. These withdrawals occur at a rate nearly four times the historical average for ancient coins during specific periods like 2025 Q1.

Decrease in Ancient Bitcoin Supply in 2025. Source: Fidelity Digital Assets

Funds that were previously sidelined due to restrictive policies, reportedly totaling over $35 billion in 2024 stemming from concerns at major investment banks, represent a potential upside. Bitwise suggests inflows could reach a base case of over $150 billion or potentially over $426 billion in an optimistic scenario.