Bitcoin's 2025 Supply and Demand Dynamics: September Report

In the third quarter of 2025, a potent narrative captivated the digital asset market: that institutional and corporate demand for Bitcoin was outstripping new supply by a factor of nearly four to one, setting the stage for an imminent and severe supply shock. This thesis, originating from a widely circulated report by the financial services firm River and amplified by outlets such as CoinDesk, posited that the combined daily absorption by businesses and investment funds vastly exceeded the ~450 BTC produced daily by miners.¹ This report provides an exhaustive, data-driven analysis of this claim, examining its components against a comprehensive backdrop of on-chain data, exchange-traded fund (ETF) flows, and corporate treasury disclosures from the period.

The central claim rested on two powerful and largely accurate pillars of market dynamics in 2025. The first was an unprecedented wave of institutional demand, driven by two distinct but concurrent forces: the aggressive, large-scale accumulation of Bitcoin by corporate treasuries, a trend single-handedly dominated by Strategy Inc., and the historic success of newly launched U.S. spot Bitcoin ETFs, which channeled tens of billions of dollars into the asset.² The second pillar was a structurally constrained supply environment. The Bitcoin network's fourth "halving" event in April 2024 had programmatically cut new issuance in half, while years of steady withdrawals had drained the inventory of Bitcoin on centralized exchanges to multi-year lows, creating a backdrop of profound market illiquidity.¹

However, a deeper forensic analysis reveals a critical nuance that challenges the narrative's forward-looking implications. While the absorption-to-issuance ratio was indeed exceptionally high for significant portions of 2025, high-frequency on-chain data from late August and early September—precisely when the "4x" narrative reached peak saturation—signaled a material cooling of this demand. Evidence points to a slowdown in corporate purchasing, a temporary reversal in ETF flows from net inflows to net outflows, and a notable increase in profit-taking by recent investors.⁶

This report concludes that the "4x absorption" figure, while directionally correct in capturing the year's macro trend, functioned as a lagging indicator. It described the market of June and July more accurately than the market of late August. The narrative's powerful implication of an impending supply shock was complicated by these emergent signs of weakening demand and a capital rotation toward other digital assets, most notably Ethereum. The market structure was transitioning from a simple spot-driven absorption dynamic to a more complex, derivatives-influenced consolidation. Therefore, while the structural conditions for a supply squeeze were present, the catalyst of unabated demand was faltering at a pivotal moment, delaying the shock and highlighting a significant disconnect between the prevailing market story and the underlying on-chain reality.

Table 1: Breakdown of Estimated Daily Bitcoin Demand vs. Supply (August 2025 Snapshot)

Category	Daily BTC Flow
Supply
Miner Issuance	~450
Demand / Absorption
Business Absorption (Corporate & Private)	~1,755
ETF & Fund Absorption	~1,430
Government Purchases	~39
Net Flow
Net Outflow from Individuals	~−3,196

The Corporate Treasury Phenomenon

A primary engine of the 2025 Bitcoin bull market was the accelerating adoption of the asset as a treasury reserve by public and private corporations. This trend, which began in 2020, reached an unprecedented scale, fundamentally altering the landscape of Bitcoin ownership and creating a significant and consistent source of demand. However, a granular analysis reveals that this demand vector, while powerful, was highly concentrated and showed signs of deceleration precisely when the supply shock narrative was gaining its greatest momentum.

Quantifying Corporate Holdings

By the third quarter of 2025, the scale of corporate Bitcoin accumulation was substantial. Publicly traded companies and private businesses collectively held approximately 1.3 million BTC in their reserves by Q2.¹ The pace of this accumulation was remarkable; in the first eight months of 2025 alone, the value of Bitcoin inflows onto corporate balance sheets exceeded the total for all of 2024 by $12.5 billion.⁹ By September, data indicated that corporate treasuries controlled over 1,010,000 BTC, representing a significant portion of the circulating supply.³ This rapid absorption positioned the corporate sector as a primary driver of the market's upward trajectory.⁹

The "Strategy" Effect: A Case Study in Aggressive Accumulation

It is impossible to analyze the corporate treasury phenomenon without focusing on its principal actor: Strategy Inc. (formerly MicroStrategy). The company's unwavering strategy of leveraging capital markets to acquire Bitcoin placed it in a league of its own. As of the August 2025 report from River, Strategy held a staggering 632,457 BTC.¹ This figure continued to climb, reaching 639,835 BTC by late September 2025, according to data from BitcoinTreasuries.net.¹⁰ This single company's holdings accounted for over 60% of all publicly declared corporate-held Bitcoin, demonstrating an extraordinary level of concentration.³

Strategy's relentless purchasing led analyst Adam Livingston to coin the term "synthetically halving" Bitcoin.¹ This concept posits that by consistently removing thousands of BTC from the open market and placing them into its long-term treasury, Strategy was creating a supply-constricting effect comparable in scale to the network's own programmatic block reward reductions. The company's acquisition timeline confirms this aggressive posture, with a massive acceleration in buying in late 2024 followed by steady, significant additions throughout 2025.⁸

Beyond Strategy: The Broader Corporate Trend

While Strategy was the dominant force, the trend of corporate adoption was broader. "Conventional businesses," distinct from firms whose primary strategy is Bitcoin accumulation, were increasingly using the asset to hedge against inflation, enhance treasury liquidity with a 24/7 accessible asset, and mitigate the counterparty risk associated with the traditional banking system.⁹ A survey of River's business clients in July 2025 revealed that these firms were making substantial commitments, allocating an average of 22% of their net income to Bitcoin.⁹

Other notable public companies also established significant treasury positions, including digital asset miners like Marathon Digital and specialized holding companies such as XXI, Metaplanet, and Hyperscale Data.³ Their participation, though dwarfed by Strategy's, signaled a growing acceptance of the "Bitcoin as corporate treasury" thesis across various sectors.

Signs of a Slowdown: The CryptoQuant Counter-Narrative

Despite the impressive headline figures of total holdings, a critical counterpoint emerged in early September 2025. A report from the on-chain analytics firm CryptoQuant, covered by ForkLog, revealed that the pace of corporate accumulation had slowed dramatically in August.⁸ While total corporate reserves reached a new high, the rate of growth had faltered.

The CryptoQuant data was specific and revealing: Strategy's monthly acquisitions plummeted from a peak of 134,000 BTC in November 2024 to just 3,700 BTC in August 2025. The purchasing volume of other corporate entities also fell significantly from its June peak.⁸ This slowdown was not an anomaly but was corroborated by market data. A September report from K33 Research noted that the significant stock price premium that treasury firms like Strategy had long enjoyed over the net asset value (NAV) of their Bitcoin holdings was contracting.¹³ Strategy's premium, for instance, fell to its lowest level since March 2024. This was a crucial development, as these companies relied on issuing new equity at a premium to efficiently raise capital for further Bitcoin purchases. A shrinking premium directly curtailed their ability to accumulate.

This confluence of data points to a market dynamic far more complex than the simple "businesses are buying" headline suggests. The corporate demand story is, to an overwhelming degree, a Strategy story. The concentration of holdings and purchasing power in a single entity makes this demand vector uniquely fragile and dependent on that one company's ability to access capital markets on favorable terms. The evidence of a sharp slowdown in Strategy's buying in August, coupled with the erosion of the stock premium that fueled it, indicates that this engine of demand was sputtering at the very moment the "4x absorption" narrative was solidifying.

Furthermore, this slowdown did not occur in a vacuum. It coincided with the maturation and explosive growth of spot Bitcoin ETFs. Investors seeking Bitcoin exposure no longer needed to pay a hefty premium for a corporate proxy like MSTR; they could now access the asset directly through highly liquid, low-fee regulated funds. This suggests the cooling of the corporate treasury trend was not necessarily a sign of waning institutional interest in Bitcoin overall, but rather a structural market shift.

The Unprecedented Impact of Spot ETFs

The launch of spot Bitcoin Exchange-Traded Funds (ETFs) in the United States in early 2024 marked a watershed moment for the digital asset class, creating a regulated, accessible, and highly liquid channel for institutional and retail capital. Throughout the first half of 2025, these vehicles became the single largest new source of demand for Bitcoin, fundamentally reshaping market structure. However, a detailed analysis of fund flows during the critical month of August 2025 reveals a significant deviation from this trend, directly challenging a key pillar of the "4x absorption" narrative.

The cumulative impact of spot Bitcoin ETFs by mid-2025 was immense. Globally, these funds had amassed 1,447,736 BTC, accounting for nearly 7% of the total circulating supply as of mid-July.⁴ The total assets under management (AUM) for this category surged to approximately $179.5 billion globally, with the U.S.-listed products leading the charge, commanding a reported AUM of $120 billion.² In 2025 alone, the broader crypto ETF category had attracted over $32 billion in net inflows, cementing its role as a dominant force in capital flows.¹⁴

Analyzing the Flows in Mid-2025: A Narrative-Defying Reversal

The figure of approximately 1,430 BTC per day in ETF demand, cited in the River report, represents a strong average for the year and reflects the powerful accumulation trend of the first and second quarters.¹ However, specific data from August 2025 paints a starkly different picture—one of temporary demand exhaustion and capital rotation.

Multiple independent sources confirm that U.S. spot Bitcoin ETFs experienced significant net outflows during August. A monthly flow report from State Street Global Advisors revealed that while the broader ETF market saw massive inflows, Bitcoin-specific ETFs recorded net outflows of $400 million for the month.¹⁶ This data is corroborated by a report from asset manager VanEck, which calculated that Bitcoin ETPs lost $600 million in August.¹⁷ Reporting from The Block was even more emphatic, stating that spot Bitcoin ETFs saw a total of $751 million in outflows for August, making it the third-worst month on record since their inception.¹⁸

High-frequency on-chain analysis from Glassnode supports this timeline. Its "Week On-chain" report from August 6th (WoC 31) had already identified that ETF flows had "turned negative," highlighting a "fairly sizeable outflow of -1.5k BTC" on August 5th, which was the largest single-day redemption since April 2025.¹⁹ By early September, their analysis confirmed that the powerful inflow trend had dissipated, with daily flows slowing to a near-neutral rate of approximately ±500 BTC per day.⁷ This body of evidence presents an irrefutable contradiction to the notion of relentless, massive ETF absorption during the month of August.

The Capital Rotation Narrative

The reversal in Bitcoin ETF flows did not happen in isolation. It was the direct consequence of a powerful, market-shaping capital rotation from Bitcoin to Ethereum. The same reports that detailed Bitcoin's outflows highlighted a torrent of inflows into Ethereum ETPs. VanEck and State Street both reported that Ethereum funds attracted over $4 billion in net inflows during August.¹⁶ This dramatic divergence was fueled by a distinct shift in market narratives, with institutional interest coalescing around themes of "digital asset treasury accumulation" (DATs) and the role of stablecoins on the Ethereum network.¹⁷ Major corporate acquisitions of ETH, such as those by Bitmine Immersion Technologies, further bolstered this sentiment.¹⁷

The data clearly indicates that the River/CoinDesk ETF demand figure of ~1,430 BTC/day, while potentially accurate as a year-to-date average, was fundamentally misrepresentative of the market conditions prevailing in August 2025. The supply shock narrative was being promulgated at a time when one of its primary demand engines was, in fact, operating in reverse.

This episode reveals a crucial evolution in the institutional digital asset market. The existence of highly liquid, regulated spot ETFs for both Bitcoin and Ethereum created a new dynamic of inter-asset competition for capital. Institutional demand is not a monolithic force aimed solely at Bitcoin; it is discerning, responsive to shifting narratives, and capable of reallocating billions of dollars between top-tier assets. The August capital rotation demonstrates that the demand pressure on Bitcoin's supply is not constant and can be temporarily alleviated as institutional focus shifts. Any robust model of Bitcoin's supply and demand must now account for the relative attractiveness of Ethereum and other potential future ETF assets, a factor that complicates any simplistic or inevitable "supply shock" thesis.

Table 2: U.S. Spot Crypto ETF Net Flows (Monthly, June - September 2025)

Month	Bitcoin ETF Net Flow (USD)	Ethereum ETF Net Flow (USD)	Key Narrative/Driver
June 2025	Positive (multi-billion)	Modest Inflows	Continued institutional adoption post-Q1 momentum.
July 2025	~$6.1 Billion (Inflow)	~$5.5 Billion (Inflow)	Strong risk-on sentiment across crypto markets.17
August 2025	~$-600 Million (Outflow)	~$4.0 Billion (Inflow)	Capital rotation to ETH driven by DAT and stablecoin narratives.17
September 2025	Positive (recovering)	Negative (outflows)	Rotation back to BTC as ETH narrative cools and Fed decision approaches.18

Miner Issuance and Dwindling Exchange Liquidity

The compelling nature of the 2025 supply shock narrative was firmly rooted in a verifiable and structurally tight supply-side equation. This dynamic was characterized by two key factors: a programmatically reduced rate of new Bitcoin creation and, more critically, a historically low level of liquid inventory available for purchase on centralized exchanges. This combination created a market environment highly sensitive to shifts in demand, where even moderate inflows could have an outsized impact on price.

The denominator in the "4x absorption" ratio is the daily issuance of new Bitcoin, a figure that is both predictable and undisputed. The Bitcoin network underwent its fourth halving event on April 19, 2024, a protocol-mandated event that occurs approximately every four years and cuts the reward for successfully mining a block in half.²¹ This event reduced the block subsidy from 6.25 BTC to 3.125 BTC.²¹

The Bitcoin network is designed to produce a new block roughly every 10 minutes. Over a 24-hour period, this translates to approximately 144 blocks (24 hours× 60 minutes/ hour/ 10 minutes/ block= 144 blocks). Therefore, the daily new supply, or miner issuance, can be calculated as 3.125 BTC/ block× 144 blocks/ day≈ 450 BTC. This baseline figure of ~450 new BTC entering circulation each day is the fundamental measure of new supply against which all demand must be compared.¹

The Critical Trend: Dwindling Exchange Reserves

While new issuance sets the baseline for supply flow, the far more dynamic and impactful factor in 2025 was the state of available supply stock. A persistent, multi-year trend of investors withdrawing their Bitcoin from centralized exchanges for long-term storage reached a critical point, leaving the amount of BTC readily available for trading at historic lows.¹

This trend was well-documented by on-chain analytics firms. A CryptoQuant report from late 2024, cited by The Block, provided a clear historical perspective, showing that the total balance of Bitcoin held on exchanges had fallen from a peak of 3.2 million BTC in October 2021 to just 2.46 million BTC by December 2024.⁵ This decline accelerated significantly following the U.S. presidential election in November 2024, which was perceived as a pro-crypto catalyst.⁵ The underlying behavior driving this trend is a strong preference among a growing cohort of investors for long-term holding (often termed "HODLing") and securing assets in self-custody or dedicated institutional custody solutions, rather than leaving them on exchanges where they are available for immediate sale. As CryptoQuant's own educational materials explain, a sustained decrease in exchange reserves is a bullish indicator, as it signals a potential "sell-side liquidity crunch".²⁴

Miners as a Source of Sell Pressure

In this environment of strong institutional accumulation and dwindling exchange liquidity, Bitcoin miners represented one of the few consistent and structural sources of sell pressure. Mining is an energy-intensive and capital-intensive business, and operators must regularly sell a portion of their mined BTC to cover significant operational costs, primarily electricity and hardware upgrades.⁴ Data from mid-July 2025 indicated that mining companies collectively held a reserve of approximately 104,548 BTC, a figure that was observed to be gradually decreasing. This suggests that, as a cohort, miners were net sellers into the market's strength, providing a steady stream of liquidity that partially offset the intense institutional demand.⁴

The combination of these supply-side factors created a structurally fragile market. The dramatic reduction in exchange reserves acted as a "volatility multiplier." Basic market mechanics dictate that price is set at the margin. With a severely depleted stock of liquid, for-sale BTC on exchanges, the market's order books were thinner. Consequently, any given buy or sell order, particularly the large-scale flows driven by institutional players, would have a disproportionately larger impact on the spot price. The same net daily demand of 3,000 BTC has a far greater price-moving effect when exchange reserves are at 2 million BTC than when they are at 3 million BTC. This low-liquidity environment amplified the price impact of the institutional demand that did occur, contributing to the powerful price appreciation in 2025 and making the "supply shock" narrative feel palpable and immediate.

This analysis also clarifies a common point of confusion in supply-side narratives. The "shock" is not merely about pitting large demand against the small flow of new issuance (e.g., 3,224 vs. 450 BTC). The more critical variable is the willingness of existing holders to sell from the vast existing stock of over 19 million BTC. The dwindling exchange reserves serve as the most reliable proxy for this willingness, and their decline indicates a clear and strengthening preference to hold rather than sell. The true supply squeeze, therefore, was a function of both low issuance of new coins and the progressive "locking up" of old coins by long-term investors. This dynamic rendered the market acutely sensitive to the behavior of the remaining active sellers, such as miners and short-term traders, whose actions became magnified in a market defined by its illiquidity.

Corroborating and Contradicting the Accumulation Thesis

While macroeconomic narratives and fund flow data provide a top-down view, on-chain analysis offers a granular, bottom-up perspective on investor behavior. A forensic examination of on-chain metrics from the August-September 2025 period is essential to rigorously test the "4x absorption" thesis. This analysis reveals a critical divergence: while the broader trend for 2025 was one of significant accumulation, high-frequency indicators show a clear and material cooling of demand at the precise moment the supply shock narrative reached its zenith.

The foundation for the accumulation narrative in 2025 is strong and well-supported by long-term on-chain metrics. River's own September 2025 report correctly identified that businesses had become the "primary force behind bitcoin's ongoing bull market".⁹ This was substantiated by macro-level on-chain data. A joint report from Glassnode and CME Group covering the first half of 2025 highlighted that Bitcoin's "Realized Cap"—a metric that values each coin at the price it last moved on-chain, effectively representing the aggregate cost basis of the network—had surged to a record $872 billion. This, the report concluded, signaled "major accumulation and rising investor conviction across the board".²⁵ Further evidence came from CryptoQuant, whose analysis of "accumulator addresses" (wallets with a history of only receiving Bitcoin and never sending) showed the addition of 50,000 BTC over a recent 30-day period, underscoring "robust and sustained interest" from high-conviction buyers.²⁷ These data points establish a clear and powerful backdrop of accumulation for the majority of the year.

The Bearish/Neutral Case (Contradiction)

The counter-argument to the timing of the supply shock narrative comes from high-frequency on-chain reports published by Glassnode during the late August to early September timeframe. These weekly analyses provide a real-time pulse of the market that stands in stark contrast to the prevailing story.

• Glassnode's "Week On-chain" Reports: A chronological review of these reports reveals a deteriorating demand picture.

• The report dated August 27, 2025 (WoC 34), was ominously titled "Top Buyers Under Stress." It noted that Bitcoin was testing key support levels and that any bounce in price would likely be met with "selling from stressed holders".²⁸ This is a crucial observation, as it indicates that investors who had bought near the recent all-time high were already holding unrealized losses and were at risk of becoming a new source of sell-side pressure, rather than contributing to demand.

• The report from September 4, 2025 (WoC 35), titled "Accumulating in the Gap," acknowledged some dip-buying activity but delivered a direct blow to the absorption narrative, stating unequivocally that "Futures and ETF flows show cooling demand".⁶

• By September 11, 2025 (WoC 36), the situation had clarified further. In a report titled "Market At A Crossroad," Glassnode analysts concluded that market momentum was being weighed down by "profit-taking and fading ETF inflows." Their assessment was that with spot demand having softened, "derivatives have become the main driver" of price action.⁷

• Glassnode's Accumulation Trend Score: This composite indicator, which measures the relative strength of accumulation versus distribution across the network, provided a clear quantitative signal. An article from August 26 cited Glassnode data showing that the Accumulation Trend Score had "turned red for all holders".²⁹ This marked a decisive shift from the near-perfect accumulation (scores close to 1) observed in July to a state of net distribution by late August.²⁹

This wealth of high-frequency data leads to a crucial conclusion: the "4x Absorption" narrative was a lagging indicator. The data used to construct the narrative was likely aggregated over a period spanning the strong market of Q2 and early Q3 2025. However, by the time the report was published and the story was amplified by media in late August, the on-chain evidence shows the market's underlying dynamics had already pivoted. The media and the market were celebrating a powerful demand trend that, according to the most immediate data, had already peaked and was beginning to reverse. This created a significant and hazardous disconnect between the popular perception and the on-chain reality.

Furthermore, Glassnode's observation that the market was transitioning from a "Spot-Led" rally to a "Derivatives-Dominated" range is a profound one.⁷ A spot-led rally is a direct function of buy-and-hold demand absorbing a finite supply on exchanges. It is the purest form of a supply squeeze. A derivatives-dominated market, in contrast, is driven by more complex forces, including the balance of leveraged long and short positions, hedging strategies, and speculative sentiment in futures and options markets. This shift explains why the price stalled and entered a period of consolidation, even as the compelling "supply shock" story suggested an imminent breakout. The narrative was fundamentally a spot market thesis, and its predictive power was greatly diminished as the market's primary directional driver shifted from spot accumulation to the equilibrium of derivatives positioning.

Table 3: Comparative Analysis of On-Chain Accumulation Indicators (July vs. August 2025)

Indicator	July 2025 Status	August 2025 Status	Implication	Source Snippet(s)
Glassnode Accumulation Trend Score	Strong Accumulation (near 1.0)	Distribution ("Turned Red")	Investor behavior shifted from aggressive buying to net selling.	29
Net ETF Flows	Strong Inflows ($6.1B)	Net Outflows (~$-600M)	The largest new source of institutional demand temporarily reversed.	16
Corporate Purchase Rate (Strategy)	Strong (27,241 BTC)	Slowdown (3,700 BTC)	The most significant corporate buyer materially reduced acquisition pace.	8
Short-Term Holder (STH) Status	High Profitability	"Under Stress"	Recent buyers were underwater, creating potential sell pressure.	28

OTC Desks and the Question of Market Impact

A critical and often misunderstood component of the institutional accumulation narrative is the mechanics of how these vast sums of Bitcoin are actually acquired. A recurring claim, notably from Strategy's corporate treasury officer, Shirish Jajodia, is that their multi-billion dollar purchases are executed without significantly impacting Bitcoin's short-term price.¹ This assertion, which may seem counterintuitive, is central to understanding how the market absorbs institutional-scale demand. An analysis of Over-the-Counter (OTC) trading practices and direct evidence from prime brokers validates this claim, revealing a sophisticated execution process that prioritizes stealth over speed.

The Claim of No Market Impact

The assertion from Strategy's treasury department was explicit. Shirish Jajodia stated that the company "does not impact short-term Bitcoin prices through its purchases" and that "if you are buying $1 billion over a couple of days, it’s not actually moving the market that much".¹ The rationale provided was the immense scale of Bitcoin's daily trading volume, which often exceeds $50 billion, suggesting that even a billion-dollar purchase is a relatively small fraction of total market activity.¹ While the reference to total volume is part of the explanation, the true reason lies in the execution venue: the OTC market.

Mechanics of Over-the-Counter (OTC) Trading

Unlike trading on a public exchange (like Coinbase or Binance) where orders are matched on a central limit order book visible to all participants, OTC trades are private transactions negotiated directly between two parties.³⁰ For institutional-scale transactions, this typically involves the buyer (e.g., a corporation) engaging with a prime brokerage or a dedicated OTC desk, which sources the required liquidity from its private network of large holders, miners, and other institutions.

The primary advantages of this method for a large buyer are threefold:

1. Minimized Price Slippage: Placing a multi-million or billion-dollar buy order on a public exchange would instantly exhaust the available sell orders at the current price, causing the price to rapidly spike upwards. This is known as slippage. In an OTC transaction, a single price is negotiated and locked in for the entire block, eliminating this adverse price impact.³⁰

2. Privacy and Anonymity: A large order on a public exchange acts as a massive signal to the market, inviting front-running and speculative activity. OTC trades are discreet, preventing the buyer's intentions from becoming public knowledge.³²

3. Access to Deep Liquidity: OTC desks can tap into large, latent pools of Bitcoin that are not available on public order books, allowing for the smooth execution of trades that would be impossible on a standard exchange.³²

Evidence from Prime Brokers: The Coinbase-MicroStrategy Case Study

The credibility of Jajodia's claim is not merely theoretical; it is substantiated by direct evidence from the very prime broker that facilitated Strategy's entry into the market. In a December 2020 case study, Coinbase detailed precisely how it executed MicroStrategy's initial landmark purchase of $425 million worth of Bitcoin.³⁴

The methodology was a masterclass in minimizing market impact. Coinbase's agency OTC desk did not execute the order as a single block. Instead, it employed a suite of proprietary smart order routing and algorithmic trading tools. The single large parent order was programmatically broken down into "close to 200,000 child fills," with the average size of each individual trade being less than 0.3 BTC.³⁴ These minuscule orders were then strategically placed across multiple liquidity venues over a five-day period. The timing, size, and destination of these orders were randomized to avoid creating any detectable pattern that other market participants could exploit.³⁴

The result was a resounding success. Coinbase confirmed it was able to acquire the entire $425 million position for MicroStrategy "without moving the market".³⁵ In fact, the execution was so efficient that the final average price achieved for the client was

lower than the market price at which the buying program began, resulting in savings of approximately $4.25 million for MicroStrategy compared to a less sophisticated execution strategy.³⁵ This case study provides empirical, verifiable proof that the claim of executing large purchases with minimal to no direct price impact is not corporate rhetoric but a technologically enabled reality of modern institutional finance.

This reality, however, leads to a more nuanced understanding of market impact. While the act of an OTC purchase itself is designed to be price-neutral, its result is not. Each time a large block of Bitcoin is acquired via an OTC desk and moved into a corporate treasury's cold storage, that supply is effectively removed from the market's active, floating inventory. This transaction permanently tightens the overall supply available on public exchanges. Consequently, the supply curve for Bitcoin on these exchanges shifts to the left, meaning there is less BTC available for sale at any given price.

The impact is therefore structural and delayed. The next wave of unrelated demand—whether from retail buyers or ETF inflows—that arrives on the public exchanges will be met with a scarcer supply. This new demand will necessarily clear at a higher equilibrium price than it would have before the OTC transaction took place. In this way, large OTC purchases contribute directly to the "volatility multiplier" effect discussed previously. They don't move the price at the moment of execution, but they make the entire market structure more sensitive and reactive to all subsequent buying pressure.

A Critical Assessment of the Supply Shock Narrative

The claim that businesses were absorbing Bitcoin at a rate four times greater than its daily issuance was a powerful and defining narrative of the 2025 market. A comprehensive analysis, weighing the evidence from institutional flows, supply-side constraints, and high-frequency on-chain data, allows for a definitive and nuanced verdict on both the specific "4x" claim and the broader "supply shock" thesis.

Revisiting the "4x Absorption" Claim

The numerical foundation of the claim—pitting the combined daily demand from businesses (~1,755 BTC) and ETFs (~1,430 BTC) against miner issuance (~450 BTC)—was directionally sound and likely an accurate representation of the market's macro-level dynamics for much of the first half of 2025.¹ The individual components of this equation are, at a high level, verifiable. Corporate accumulation was a dominant theme, and ETF inflows were historically strong through Q2.²

However, the claim becomes misleading when applied with specificity to the market conditions of late August 2025. This investigation has demonstrated that at the very time this narrative was reaching its peak influence, both of the primary institutional demand vectors were showing clear signs of faltering.

• Corporate buying, heavily reliant on Strategy Inc., saw its pace slow dramatically in August, constrained by a shrinking stock premium that limited its ability to raise capital for new purchases.⁸

• ETF flows, the other main engine, had temporarily reversed course, recording hundreds of millions of dollars in net outflows during August as a significant capital rotation toward Ethereum-focused products took hold.¹⁶

Therefore, while the "4x" figure may have been a reasonable year-to-date average, it was not an accurate reflection of the real-time supply and demand balance in late Q3 2025.

The Verdict on the "Supply Shock"

A true supply shock requires the confluence of two essential conditions: severely constrained supply and sustained, overwhelming demand. The analysis confirms that the first condition was unequivocally met in 2025. The post-halving issuance rate was at an all-time low, and, more importantly, the liquid supply of Bitcoin on exchanges had been drained to multi-year lows, creating a structurally illiquid market primed for volatility.¹

The second condition, however, proved to be less persistent than the narrative suggested. The on-chain and fund-flow evidence from late Q3 demonstrates that the demand side of the equation was weakening. The "overwhelming" institutional demand that characterized the first half of the year had cooled, giving way to profit-taking, a temporary shift in focus to other assets, and a more cautious stance from recent buyers.⁶ The market was transitioning from a simple, spot-driven squeeze dynamic to a more complex consolidation phase where derivatives positioning, rather than pure spot absorption, began to exert a greater influence on price. This shift effectively acted as a safety valve, preventing the full force of the potential supply shock from being realized at that specific time.

Final Thematic Conclusions

This deep dive into the market dynamics of 2025 yields several broader conclusions about the evolution of the Bitcoin market:

1. The Maturation of a Market: The events of 2025 illustrate a significant step forward in the sophistication of the Bitcoin market structure. The emergence of spot ETFs created a direct, efficient, and regulated firehose for institutional capital, which, in turn, began to render less efficient proxy vehicles like corporate treasury stocks obsolete. The clear capital rotation between Bitcoin and Ethereum ETFs demonstrates that institutional demand is not a blind, monolithic force but is increasingly nuanced, theme-driven, and competitive among top-tier digital assets.

2. The Lag Between Narrative and Reality: The "4x absorption" story serves as a classic case study in the lag between a market narrative and the underlying data. Powerful, easily digestible narratives often gain maximum traction just as the trend they describe is beginning to exhaust itself. For sophisticated market participants, this highlights the critical importance of utilizing high-frequency, on-chain data to look past compelling but potentially lagging stories and assess real-time market dynamics.

3. The Structural Shift to Illiquidity: Perhaps the most enduring legacy of the 2025 market cycle, irrespective of short-term demand fluctuations, is the permanent removal of a substantial portion of Bitcoin's circulating supply into the hands of long-term, high-conviction holders, namely corporations and ETF custodians. This has fundamentally and likely irreversibly altered Bitcoin's supply profile, creating a backdrop of structural illiquidity. This condition ensures that the market will remain highly sensitive to future shifts in demand, suggesting that the "supply shock" was not a failed thesis, but perhaps merely a postponed one, awaiting the next powerful wave of sustained institutional inflow.

Works cited

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4. Bitcoin ETFs, Governments & Corporations Now Hold Over 16% of ..., accessed September 24, 2025, https://www.ccn.com/education/crypto/bitcoin-demand-surge-2025-whos-selling/

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