with Bitcoin BTC
-0.010%
Recent half-life It is estimated that this will occur around 9 PM ET today when miners’ block subsidy rewards will be slashed from 6.25 BTC to 3.125 BTC. We asked several companies in the industry what impact this could have on Bitcoin price action.
The Bitcoin halving (or “halving” as some call it) is associated with significant fluctuations in the price of the cryptocurrency. Although not a direct cause and effect relationship, these events often occurred prior to significant uptrends in the Bitcoin market.
After Bitcoin price halving. Image: Bernstein.
“Historically, Bitcoin has experienced significant price increases in the six months following each halving. In fact, Bitcoin has hit new all-time highs every four years between previous halving events,” Binance CEO Richard Teng told The Block.
“The main question everyone has is how the Bitcoin price will react to the halving this time.” said Thomas Perfumo, head of strategy at Kraken. “Maybe the market cycle started earlier, but history shows that we are not at the end of the cycle either.”
Nansen research analyst Aurélie Barthere agreed that Bitcoin’s post-halving price returns are generally good. This was five to six times higher in the 250 days following the halving than in other years. “While the current US macro (long-term high US interest rates) is forcing a correction in risk assets, including cryptocurrencies, our main scenario is that Bitcoin’s upward trend remains intact,” Barthere said.
“While others look at the Bitcoin price from a technical perspective and predict that the price will rise, I look at the basic principles of supply and demand and come to the same optimistic conclusion,” said Greg Beard, CEO of Stronghold Digital. said. Mining has been added.
Is the halving ‘priced in’?
The question of whether the Bitcoin halving is reflected in the price is asked endlessly whenever a halving occurs. However, unlike previous halving cycles, Bitcoin hit a new all-time high of $73,836 before today’s fourth halving on March 12th. Analysts at cryptocurrency exchange Coinbase claimed earlier this month that Bitcoin was priced around this time.
Investment bank JPMorgan agrees. Analysts led by Nikolaos Panigirtzoglou reiterated similar earlier views in a report on Wednesday, saying, “We do not expect Bitcoin to rise in price after the halving, as it is already priced in.” “In fact, we believe the Bitcoin price will trend downward after the halving for a number of reasons.”
The reason is that Bitcoin is still ‘overbought’ according to analysis of Bitcoin futures open interest. Additionally, the price of Bitcoin is still well above JP Morgan’s volatility-adjusted price relative to gold of $45,000 and still higher than its projected post-halving production cost of $42,000, analysts reiterated.
But others disagree. John Glover, former managing director of Barclays Bank and now CIO of cryptocurrency lending platform Ledn, warned market participants to be patient, arguing that it will take time for new supply cuts to impact the market.
“While many participants are focusing on the historical impact halvings have had on the BTC price, few are talking about how long it typically takes for this to come to fruition. Each halving has resulted in price highs between 10 and 10 16 months from the actual event, the key here is patience, but as we know, people rarely make a profit,” Glover said.
“This halving will trigger a huge supply shock to the system. With the current daily supply of US ETFs being 5-10x, demand after the halving will be 10-20x supply,” added Samson Mow, CEO of Bitcoin technology company JAN3.
“Bitcoin halving is priced in for the 0.1% of the world’s population that understands it,” Dan Held, general partner at Asymmetric, a Bitcoin-focused VC firm, told The Block. He said, “I don’t care about the other 99.9%.”
Is it different this time?
In addition to price action, increased participation in the Bitcoin market through the recently launched spot Bitcoin exchange-traded fund in the US is a clear differentiator this time around.
“The fourth halving also comes at a time when we have seen a significant increase in institutional participation since the last halving occurred in 2020,” said Alex Cable, Regional VP of Chainalytic WEMEA.
Spot Bitcoin ETFs from BlackRock, Fidelity and others began trading in the U.S. in January, and applications for spot Bitcoin ETFs from China Asset Management, Harvest Global, Bosera and HashKey were approved by the Hong Kong Securities and Futures Commission earlier this week. I received it.
“Institutions are not just entering the market, they are now shaping its trajectory and bringing new levels of credibility, stability and attention from mainstream finance. “As Bitcoin becomes increasingly integrated into the global economy, it is opening new avenues for its demand and utility,” Cable added.
Spot Bitcoin ETFs have had an impressive start to the year, with total net inflows of over $12 billion in just a few months. However, spot Bitcoin ETF flows have slowed since peaking at $1.05 billion in daily net inflows on March 12, according to The Block’s data dashboard. Additionally, it has now recorded net outflows for five consecutive trading days, totaling $319.1 million by the halving.
“Spot Bitcoin ETFs reshaped Bitcoin’s market structure following the halving by establishing a new benchmark for BTC demand,” Scott Shapiro, senior product director at Coinbase, told The Block. This does not necessarily mean the asset class will face a supply crisis as the rate of newly mined Bitcoin falls, but we believe that combined with new supply-side dynamics, access to a broader capital base could increase. After dividing this in half, make the months different.”
Stronghold’s Beard agreed that the combination of decreased coin supply and increased demand would lead to further imbalances. “The recent price surge supporting the Bitcoin ETF is likely to have a compounding effect by generating more interest. Given this, it would not be surprising to see the Bitcoin price rise significantly over the next two years,” he said.
“This upward trend was potentially driven by increased interest from institutional investors in the U.S., which also contributed to slightly higher market volatility over the period,” Hashdex CIO Samir Kerbage told The Block.
“We are monitoring Bitcoin’s price action and whether consolidation may occur following seven consecutive months of positive performance. Continued demand from ETFs could offset any potential consolidation,” Kerbage added. “Regardless of how the halving unfolds, we believe our investment will pay off. With institutional interest accelerating amid a favorable macro environment and positive on-chain developments, the case for Bitcoin is stronger than ever.”
Others argue that this halving is more of a narrative than anything else. “Daily supply will be halved, but as a percentage of average daily volume it will be a negligible amount,” said Gemini institutional head Claire Ching. “Bitcoin prices will continue to be skewed toward the demand side, and ETFs and the institutionalization of Bitcoin will be a big driver of that.”
Stronghold’s Beard added, “I think the significance of the Bitcoin halving is being overstated, but the latest Bitcoin rally is more than a fad. Bitcoin is maturing with institutional adoption.”
Disclaimer: The Block is an independent media outlet delivering news, research and data. As of November 2023, Foresight Ventures is a majority investor in The Block. Foresight Ventures invests in other companies in the cryptocurrency space. Cryptocurrency exchange Bitget is an anchor LP of Foresight Ventures. The Block continues to operate independently to provide objective, impactful and timely information about the cryptocurrency industry. Below are our current financial disclosures.
© 2023 The Block. All rights reserved. This article is provided for informational purposes only. It is not provided or intended to be used as legal, tax, investment, financial or other advice.