This article was originally published on MarketWatch on Feb. 10, 2021

Bitcoin prices have been scaling new heights recently, and the basic dynamic of tighter supply and increased demand has underpinned that climb, according to a report compiled by London-based crypto custodian Copper.co.

Copper made the case that the recent price ascent is a function of steadily rising demand for Bitcoins and the growing scarcity of the asset that has a maximum supply of 21 million, which is projected to be hit by 2140. The researcher also said that the most of the interest in new bitcoins is coming from North America, and the U.S. in particular.

Approximately, 18.625 million bitcoins have been created, or digitally mined in the parlance of cryptocurrency enthusiasts, according to CoinMarketCap.com, but a good chunk of that has been lost, wrote the folks at Copper.

By their estimates, 56% of bitcoins are owned by investors, 18% are lost, 15% are held by so-called traders and the remainder has yet to be mined (see attached chart):

Screenshot-2021-02-11-at-08.19.35

Copper said that because the majority of investors are long-term owners, representing eight out of 10 holders of the cryptocurrency, rising appetite for the world’s most popular digital asset can have an outsize effect on values.

The researchers said that bitcoin’s rise above $40,000 was already in play even before Tesla Inc. TSLA, -5.26% made its surprise filing with regulators on Monday, declaring its investment of $1.5 billion in bitcoin, and its decision to eventually allow customers to purchase its products with bitcoin.

“Data shows that new investors pushed prices much higher in the last six months of 2020, to acquire north of 2 [million] bitcoins,” wrote Copper’s researchers in the study.

“In order to be able to buy bitcoin in such deep quantities, the price rallied well above the $20,000 mark that helped persuade early investors to sell their cryptocurrency above its previous all-time high,” they said.

The crypto market is reliant on a new supply of some 3.2 million bitcoins on exchanges and held by traders, according to the report.