Bitcoin's Institutional Adoption and Supply Scarcity: A $1.3M Price Catalyst by 2035

Bitcoin’s journey from a speculative asset to a cornerstone of institutional portfolios has been nothing short of revolutionary. By 2025, the cryptocurrency’s institutional adoption has accelerated to unprecedented levels, driven by regulatory clarity, infrastructure development, and a growing recognition of Bitcoin’s role as a hedge against macroeconomic instability. This shift, combined with its inherent supply scarcity, is creating a powerful catalyst for long-term price appreciation.

Institutional Adoption: A Structural Shift

Institutional investors now allocate 5% of their portfolios to digital assets, with family offices leading the charge at 25% [5]. The introduction of U.S. spot Bitcoin ETFs, such as BlackRock’s iShares Bitcoin Trust (IBIT), has been a game-changer. By Q3 2025, these ETFs had attracted $118 billion in inflows, with IBIT capturing 89% of the market share [1]. Harvard University’s $117 million allocation to IBIT in Q3 2025 further solidified Bitcoin’s legitimacy as a non-correlated asset [1].

The institutionalization of Bitcoin is not limited to ETFs. Corporate treasuries and sovereign wealth funds have also entered the fray. MicroStrategy, now rebranded as Strategy Inc., holds 632,457 BTC valued at over $71 billion [3]. Meanwhile, the U.S. Strategic Bitcoin Reserve (SBR) and other sovereign entities are treating Bitcoin as a strategic reserve asset, removing 3.68 million BTC (18% of the circulating supply) from active trading [1]. These moves reflect a broader trend: Bitcoin is no longer a speculative bet but a strategic allocation tool.

Supply Scarcity: The Deflationary Floor

Bitcoin’s fixed supply of 21 million coins is a critical factor in its long-term valuation. By June 2025, over 17% of the total supply had become “ancient supply”—coins held for 10 years or more—outpacing new supply issuance [1]. Daily issuance of 450 BTC is now being outpaced by the accumulation of 566 BTC in ancient supply, reinforcing Bitcoin’s scarcity. This dynamic is amplified by institutional demand, which is projected to reach $3 trillion by 2027 [3].

The interplay between supply and demand is best illustrated by the “supply deficit” created by ETF inflows. Network economist Timothy Peterson calculated that ETFs have generated a $40 billion supply deficit, potentially pushing Bitcoin’s price to $135,000 within six months [5]. With only 2 million coins remaining to be mined, the scarcity effect will intensify, creating a deflationary floor that supports long-term price appreciation.

The $1. 3M Price Target: A Structural Case

Bitwise Asset Management, overseeing $15 billion in assets, forecasts a 28.3% compound annual growth rate (CAGR) for Bitcoin over the next decade, projecting a price of $1.3 million by 2035 [1]. This forecast is underpinned by three key factors:
1. Institutional Demand: Over 59% of institutional investors now allocate at least 10% of their portfolios to Bitcoin [6].
2. Supply Constraints: Annual Bitcoin supply growth will drop from 0.8% to 0.2% by 2032 [1].
3. Macroeconomic Tailwinds: Bitcoin’s low correlation (0.21) with U.S. equities and its role as a hedge against fiat devaluation make it an attractive diversifier [4].

The structural imbalance between supply and demand is further reinforced by regulatory developments. The CLARITY Act and ERISA revisions have unlocked $43 trillion in U.S. retirement assets for crypto exposure, reducing the uncertainty premium in Bitcoin pricing [1]. Additionally, the Federal Housing Finance Agency’s 2025 directive to include cryptocurrencies as mortgage-qualifying assets has broadened institutional acceptance [6].

Risks and Volatility

While the long-term case for Bitcoin is compelling, volatility remains a defining characteristic. A 2025 study found that Bitcoin’s annualized volatility dropped by 75% compared to 2023 levels, but bear markets are still a possibility [5]. Analysts caution that macroeconomic risks—such as policy shifts or global liquidity reversals—could trigger corrections. However, the growing institutionalization of Bitcoin suggests that bear markets will become shorter and less severe over time [5].

Conclusion

Bitcoin’s institutional adoption and supply scarcity are creating a self-reinforcing cycle of demand and scarcity that supports a $1.3M price target by 2035. As corporations, sovereigns, and institutional investors continue to allocate capital to Bitcoin, the market is shifting from speculative trading to strategic, long-term asset allocation. This transition, supported by regulatory clarity and macroeconomic tailwinds, positions Bitcoin as a core component of modern portfolios—and a formidable catalyst for price discovery in the decades ahead.

Source:
[1] Bitcoin's Path to $1.3M by 2035: How Institutional Adoption and Scarcity Fuel the Digital Gold Era
[2] A Supply and Demand Framework for Bitcoin Price Forecasting
[3] Bitcoin's Institutional Revolution: How Treasury Deals and Scarcity Fuel $192K Surge
[4] Institutional Adoption and Correlation Dynamics: Bitcoin’s Evolving Role in Financial Markets
[5] Bitcoin ETF Inflows: $51B Drives BTC-USD Toward $240K
[6] Institutional Bitcoin Investment: 2025 Sentiment, Trends, and Market Impact