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Past halvings have been correlated with higher prices, but current economic conditions could disrupt that historical pattern, Goldman Sachs said in a recent note to clients. According to the bank, factors such as inflation and interest rates could potentially affect how Bitcoin reacts to this halving cycle.
Historically, the price of Bitcoin has risen significantly following the previous three halvings, but it has taken different amounts of time to reach new all-time highs. Goldman Sachs warned against assuming the same price surge will happen again.
“Care should be taken in estimating the impact of past cycles and halvings, taking into account individual macro circumstances,” the bank advised.
The core argument is that macroeconomic conditions are no longer the same. Current economic factors such as high inflation and interest rates have favored riskier investments such as Bitcoin, unlike previous halvings where money supply was high and interest rates remained low.
Today, U.S. interest rates are hovering above 5%, and recent data suggests the Fed’s inflation target will take longer to reach than expected.
Bank of America still expects the Fed to cut rates in December, but noted the risk it may not do so until March 2025.
Supply and demand will determine the long-term outcome
According to Goldman Sachs, near-term price action before and after the halving may not have a significant impact on the price of Bitcoin in the coming months. The bank believes supply-demand dynamics and growing interest in Bitcoin ETFs will be bigger factors than halving hype.
“Whether next week’s BTC halving turns out to be a “buy on the rumor, sell on the news” will have less of an impact on BTC’s (mid-term) outlook, as BTC price performance will likely continue to be driven by its supply. Dynamic and ongoing demand for the BTC ETF, combined with the self-reflective nature of the cryptocurrency market, is a key determinant of spot price action,” Goldman Sachs said.
According to a recent report from Bybit, exchange reserves could run out of Bitcoin within nine months. These scarcity fears come ahead of the Bitcoin halving, which halves the number of new Bitcoins created per block.
On the other hand, demand is rapidly increasing. According to Bloomberg, the recently launched spot-based Bitcoin ETF reached $59.2 billion in assets under management in just three months.
A recent report from 21Shares suggests that the arrival of spot Bitcoin ETFs in the US could push Bitcoin’s rally ahead of schedule.
Previously, it typically took about 172 days for Bitcoin to surpass its previous high (ATH), and after the halving, it took 308 days to reach a new cycle peak. But this cycle is different. Bitcoin has already established a new ATH last month, unlike in past cycles where it typically traded 40-50% below ATH in the weeks leading up to the halving.
Bitcoin is currently trading around $61,300, down about 3.5% in the last 24 hours, according to data from CoinGecko. The expected birth date is two days away.
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