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The largest asset manager in the world, BlackRock, has expressed concern over Bitcoin’s limited supply in response to growing demand from affluent American investors. A recent study, Why Bitcoin? Model Portfolio Builders’ Point of View, examines how Bitcoin’s supply dynamics vary from those of more conventional assets like gold.
Unlike gold, Bitcoin cannot increase its supply in response to rising demand. According to analysts Brett Wager and Michael Gates, Bitcoin is resistant to supply increase since its issuance schedule is set.
Bitcoin’s total supply is capped at 21 million, with issuance following a pre-determined schedule until 2140. However, BlackRock’s report notes that the actual available supply is much lower.
“As many know, there is a predictable issuance schedule of new bitcoin until 2140 with a pre-programmed max supply of 21 million tokens. However, less widely known is that the real available float is likely far smaller, with a conservative estimate of 3 to 4 million issued bitcoins visible on the blockchain but considered permanently inaccessible (and therefore out of circulation) due to lost, forgotten, or otherwise destroyed keys.”
The analysts highlight Bitcoin’s extreme scarcity with a striking comparison: “To illustrate how few available bitcoins there are, if every millionaire in the US asked their financial advisor to get them 1 bitcoin, there wouldn’t be enough.”
BlackRock’s Model Portfolio Solutions team identifies several reasons why Bitcoin holds long-term investment value. The asset manager sees Bitcoin as a potential store of value, an alternative to traditional monetary systems, and a hedge against political and economic instability.
“Namely, to potentially serve as a novel store of value and global monetary alternative, hedge to US dollar hegemony and political instability, and proxy play on the broader ‘offline’ to ‘online’ digital transition of goods and services – supercharged by ‘boomer-to-millennial’ demographic tailwinds. Collectively, these features may help provide unique and additive sources of risk premia and diversification to traditional multi-asset portfolios.”
As institutional interest grows, Bitcoin’s scarcity could drive further price increases. Currently, Bitcoin is trading at $86,955, reflecting strong investor confidence in its future.