Bitcoin's Supply Crunch: Why 42% of BTC Could Become Illiquid by 2032
Fidelity's research suggests that 8.3 million bitcoins may become illiquid by 2032, representing 42% of the circulating supply. This potential supply squeeze, driven by long-term holders and corporate accumulation, could significantly impact Bitcoin's price dynamics.
Bitcoin's Growing Scarcity: A Looming Supply Crisis
Bitcoin was designed with scarcity at its core—a maximum supply of 21 million coins that will never be exceeded. While the final bitcoin won't be mined until approximately 2140, a concerning trend is developing much sooner: the rapid growth of illiquid bitcoin—coins effectively removed from circulation due to long-term holding strategies.
Financial giant Fidelity has released an eye-opening report suggesting that by 2032, approximately 42% of Bitcoin's circulating supply—about 8.3 million BTC worth roughly $960 billion at current prices—could become illiquid. This prediction has profound implications for Bitcoin's valuation and investment potential.
What's Driving Bitcoin's Increasing Illiquidity?
Fidelity's research identifies two primary groups contributing to this supply contraction:
- Long-term holders (HODLers): Individual investors committed to holding Bitcoin for extended periods, including permanently lost or locked coins
- Corporate treasuries: Public companies holding at least 1,000 BTC as part of their strategic reserves
Since late 2024 and early 2025, these two investor categories have been systematically reducing the liquid supply available for trading. The report highlights that corporate Bitcoin treasury strategies have been particularly transformative, accelerating the rate at which coins move from active circulation to long-term storage.
The Bitcoin Halving Multiplier Effect
The supply squeeze is further intensified by Bitcoin's programmed halving events, which reduce the production of new bitcoins by 50% approximately every four years. Even if corporate acquisition rates remain constant, the reduction in new supply means that these purchases will represent an increasingly significant portion of available coins.
As of June 30, 2025, Fidelity reports that HODLers and corporate entities combined held Bitcoin worth approximately $628 billion (at the then-price of $107,700 per BTC). This represents a doubling of their holdings compared to June 2024, demonstrating the accelerating pace of accumulation.
Market Implications of a Bitcoin Supply Crunch
The economic principle is straightforward: when supply decreases while demand remains steady or increases, prices tend to rise. For Bitcoin, this basic market dynamic could have dramatic effects:
- Price volatility: Reduced liquidity typically leads to more volatile price movements when large buy or sell orders enter the market
- Upward price pressure: Particularly following halving events, when supply constraints become more pronounced
- Premium pricing for liquid bitcoin: As accessible coins become scarcer, those available for immediate purchase may command higher prices
Fidelity, which manages an impressive $16.4 trillion in assets, appears convinced that Bitcoin could eventually face supply shortages relative to growing demand. The company's analysis suggests this dynamic will support Bitcoin's long-term value and potentially trigger significant price increases during periods of heightened market tension.
Beyond Corporate and Individual Holders
The report notes that current projections may actually underestimate the illiquidity trend. As stated in Fidelity's conclusions: "If nation-state adoption increases and the regulatory environment surrounding Bitcoin continues to evolve, the growth of illiquid supply could be even more dramatic than what has been detailed here."
This perspective recognizes that sovereign wealth funds, government treasuries, and central banks represent another potential category of long-term holders that could further accelerate the removal of Bitcoin from active circulation.
Strategic Considerations for Investors
For investors, Fidelity's research offers important strategic insights. The transition from abundance to scarcity is happening in real-time, potentially creating a closing window of opportunity. The report emphasizes that understanding this transition is "essential for developing long-term portfolio strategies."
The underlying message is clear: if nearly half of all bitcoins become unavailable for trading within a decade, those wishing to establish or increase positions may face increasingly competitive market conditions.
The Bigger Picture
Bitcoin's programmed scarcity has always been central to its value proposition. What Fidelity's analysis highlights is how market behaviors are amplifying this inherent scarcity well ahead of the ultimate supply cap being reached. The combination of institutional adoption, individual conviction, and programmed supply reduction is creating a perfect storm for Bitcoin's liquidity.
Whether this leads to the dramatic price appreciation that many Bitcoin proponents expect remains to be seen, but Fidelity's research provides compelling evidence that the market dynamics are trending in that direction.