But the supply hasn't increased. These bitcoins existed prior to the offer of sale. The only thing that increased was the free float.

That counts as supply. Silver in the earth also exists prior to sale, but it only counts when you actually sell it.

By this logic, withdrawing money from the ATM increases money supply... Also, the expected amount of silver in the ground is factored into the current price of silver. It's really only when new deposits are discovered that there is an impact to the price. Actually pulling known silver deposits out of the ground has a negligible effect on the price.

If a bunch of people in a city decided to withdraw cash from all the ATMs one day, so that the amount of cash in ATMs got very low, don't you think the banks could increase the ATM fee and discover that people would be willing to pay the higher price? That example fits the logic perfectly.

This is completely false. If what you were saying were true, the price of oil would not change when the stability of the middle east was under question. Supply is the amount on the market, not the amount locked up somewhere that can't be brought to market immediately.

>By this logic, withdrawing money from the ATM increases money supply

It does. Although it has been critized, the quantitative theory of money [1] could perfectly explain the drop.

[1]http://en.wikipedia.org/wiki/Quantity_theory_of_money

Except fiat economics are a bit more complicated than that. Everyone getting a 100% wage raise would increase money supply (and by extension massive inflation).

The publicly available portion of something is the supply of a good.

That would be like saying the supply of uranium in the universe hasn't increased, the only thing that increased was the free float of uranium (say due to new mining technologies, or the sale of previously restricted stocks).

Supply is not a number, it's a function relating the price someone bids, to the quantity the bidder could buy at that price.

For example, if 100 bitcoins that were previously unavailable at any price, become available for $600, then supply at $600 (and above) increases by 100. The supply curve shifts to the right.

http://www.investopedia.com/university/economics/economics3....

It is fairly common to use the phrase "the supply increased" to mean "the supply curve shifted to the right." It's an abuse of terminology in my opinion, but it's already extremely widespread.

The amount available for sale at a given price probably increased though.

Which I think has a more significant effect on the market price than the total amount that exists.

Only when increased supply doesn't cause an even higher increase in demand. There are some examples of this in history, although they are few and far between.