Sygnum Bank Sees Bitcoin Gaining Safe-Haven Status Amid Shrinking Supply and Market Turmoil

Bitcoin’s reputation as a safe-haven asset is getting a fresh boost thanks to turbulence in U.S. Treasury markets and a weakening dollar, according to a new market outlook from Sygnum Bank.

The report highlights a significant drop in Bitcoin’s liquid supply — estimated at around 30% over the last 18 months — which could pave the way for increased price volatility as demand continues to rise. “As Bitcoin’s liquid supply tightens and positive demand trends persist, the market is primed for potential price shocks,” Sygnum analysts noted.

Driving demand are rising inflows into Bitcoin ETFs and a growing acceptance by governments of Bitcoin as a reserve asset. This convergence is fueling talk of a “demand shock,” where too many buyers chase too few coins.

Since late 2023, more than one million BTC have been withdrawn from exchanges, predominantly by ETFs and corporate treasury buyers, putting extra pressure on traders who rely on liquidity to manage positions or hedge risks.

Amid broader macroeconomic uncertainty, Bitcoin’s appeal as a hedge is strengthening. Sygnum points out that falling U.S. Treasury prices and ballooning federal debt are steering investors back toward gold and increasingly toward Bitcoin, reinforcing its status as a preferred safe haven.

Geopolitical developments are also adding fuel to demand. Three U.S. states have passed legislation supporting Bitcoin reserves, with New Hampshire already signing its bill into law and Texas expected to follow. Overseas, countries like Pakistan and prominent UK political figures are exploring official Bitcoin reserve allocations, which could eventually bring significant institutional interest to the market.

In summary, Sygnum believes the crypto cycle is far from over, with tightening supply and mounting demand setting the stage for heightened volatility and growth.