Bitcoin (BTC) becomes rarer after each halving, but the next event taking place in the next four days will make the digital asset twice as rare as gold, according to analysts at leading crypto exchange, Bybit.
A report on what to expect before and after the Bitcoin halving revealed that BTC will experience a supply squeeze after the event as the reserves of all centralized exchanges could be consumed within nine month.
Twice as rare as gold
Bybit said that the Bitcoin stock-to-flow (S2F) model justifies its claims, as the measurement showed that BTC becomes more scarce than gold after each halving. The S2F ratio is calculated by dividing a product’s circulating supply by its annual production to obtain a scarcity gauge.
At the time of writing, Bitcoin’s S2F ratio was hovering around 56, while gold’s was at 60. After the halving, Bitcoin’s ratio is expected to double to 112.
The halving slows the supply by reducing the rate of BTC production, and a supply squeeze may be inevitable. Bitcoin is already seeing the first signs of a short squeeze, which will get worse after the halving.
The supply of BTC for spot Bitcoin exchange-traded funds (ETFs) typically comes from centralized exchanges, as investors realize their profitable positions and miners sell their block rewards. When mining rewards are reduced and investors store their assets in cold storage or decentralized wallets, miners will refrain from selling quickly and the sell-side supply flowing to exchanges will decrease.
A complex cycle
Currently, around two million bitcoins are in centralized exchange reserves. Assuming spot Bitcoin ETFs see daily inflows of $500 million, approximately 7,142 BTC will leave exchange reserves daily, indicating that reserves will only last nine months after the halving.
“With this in mind, it is not surprising that the price of Bitcoin continues to climb before the halving, or even after, as the supply squeeze propels the price to a new record high,” Bybit said.
Although halvings are known to trigger a Bitcoin price rally, analysts view this cycle as complex and remain uncertain about the effect of the upcoming event as BTC has already recorded a new high. Some believe that the recovery after the halving will be less remarkable than what the market experienced after past events.
Nonetheless, market experts believe that demand will drive BTC higher post-halving this time around as spot Bitcoin ETFs reach their full potential.
