Why Bitcoin’s Scarcity Dynamics Could Propel Prices Beyond $120K
Taylor Brooks
May 22, 2025
“With Bitcoin’s capped supply and looming halving events, the price trajectory toward $120K is more than conjecture—it’s encoded in its very architecture.”
Introduction
It’s no secret among crypto veterans: Bitcoin’s supply cap of 21 million coins creates a built-in asymmetry between scarce supply and growing demand. When you combine this fundamental with cyclical halving events—which slash miner rewards every four years—you end up with a narrative that feels almost deterministic. But can it really push BTC past $120,000? As of May 2025, on-chain metrics and institutional flows suggest the ingredients are aligning for another historic run.
In this deep-dive, we’ll unpack the protocols that enforce scarcity, examine fresh signals from long-term holders, and explore how past halvings have reshaped price curves—ultimately making the case for a $120K target in the next twelve months.
Mechanics of Scarcity
Fixed Supply & Halving Cycles
Bitcoin’s code enshrines a maximum supply of 21 million coins. To prevent inflationary release, the network halves miner rewards roughly every 210,000 blocks—approximately every four years. The latest halving in April 2024 reduced new issuance from 6.25 to 3.125 BTC per block. Historically, each halving has precipitated a multi-month price rally: after the 2016 halving, BTC jumped 290% in 12 months; post-2020 halving, it surged 420%.
Stock-to-Flow & Demand Pressure
Analysts often cite the stock-to-flow (S2F) ratio—the amount of existing supply divided by annual production—to quantify scarcity. Bitcoin’s S2F has doubled since the last halving, crossing 55 (compare gold’s S2F of 62). As new coins enter the market at a slower clip, existing supply becomes more prized, laying groundwork for price appreciation when demand remains steady or grows.
Recent On-Chain Signals
On-chain analytics firm Glassnode reports a 4% decline in exchange BTC balances over the past two months, equivalent to 120,000 coins leaving trading venues—a sign that holders are reluctant to sell. Simultaneously, addresses with more than 10 BTC have increased their holdings by 15,000 coins, suggesting whales are stacking before a potential rally.
Moreover, realized growth—measuring part of the supply moved at a profit—has hit 1.8 million BTC in profit zones for the first time since late 2021. These on-chain signals collectively point to a regime where supply contraction meets enhanced demand from both retail and institutional cohorts.
Impact on Price Dynamics
The combined effect of higher S2F and reduced exchange availability creates a tight market. Order books on major exchanges like Binance show thin ask walls above $100K, so modest bid pressure can cascade into rapid price extensions. In April 2025, a single $200 million buy order on Coinbase pushed BTC from $95K to $102K within two hours—a microcosm of how scarcity can amplify momentum.
Historically, post-halving cycles exhibit a “stair-step” pattern: an initial surge, consolidation, and a final parabolic phase. If Bitcoin follows a similar script in 2025–26, the $120K target could materialize during that final leg, particularly if macro conditions remain supportive.
Expert Perspectives
“Scarcity is the secret sauce,” says PlanB, creator of the S2F model. “With institutional ETFs now maturing their processes, we’re entering the final countdown to a supply shock.” Meanwhile, Galaxy Digital’s head of research, Noelle Acheson, cautions, “While halvings reinforce scarcity, risk management is key. Volatility spikes—as we saw in May 2024—can trigger profit-taking before the next leg up.”
Looking Ahead
Bitcoin’s next major test will be institutional adoption around the pending BlackRock ETH ETF and other large-cap funds seeking crypto exposure. If those flows mirror the earlier BTC ETF wave—estimated at $5–7 billion net inflows—the supply squeeze could intensify, driving price toward and beyond $120K.
Traders should monitor on-chain reserve changes, ETF flow reports, and macroeconomic cues—especially Fed communications on interest rates. If demand remains robust and supply issuance stays subdued, Bitcoin’s scarcity dynamics will write the next chapter in its journey, one potentially defined by six-figure prices.