With the latest Bitcoin halving This is estimated to happen around 9 p.m. ET today – when the miner block subsidy is reduced from 6.25 BTC to 3.125 BTC – we asked several companies in the industry what impact this could have on price action of Bitcoin.
Bitcoin halvings (or as some call them, “halvings”) have been associated with significant fluctuations in the price of the cryptocurrency. Although not a direct cause-and-effect relationship, these events often preceded large rallies in the bitcoin market.
“Historically, bitcoin has seen notable price increases in the six months following each halving event. In fact, Bitcoin has reached new all-time highs in every four-year period between previous halving events,” Richard Teng, CEO of Binance, told The Block.
“The main question everyone is asking is how will the price of Bitcoin react to the halving this time? » said Thomas Perfumo, head of strategy at Kraken. “Maybe the market cycle is starting earlier, but history suggests we haven’t reached the end of the cycle either.”
Aurélie Barthere, research analyst at Nansen, agreed that Bitcoin price returns after the halving were generally higher – five to six times higher in the 250 days following the halving compared to other years. “Right now, the macroeconomic situation (high US rates for longer) in the US is forcing a correction in risk assets including crypto, but our main scenario is that the uptrend remains intact for bitcoin” , Barthere said.
“While others look at the price of Bitcoin on a technical basis and predict it will rise, I look at the fundamentals of supply and demand and draw the same bullish conclusions,” Greg Beard, CEO from Stronghold Digital. Mining, added.
Is the halving “taken into account”?
The question of whether the Bitcoin halving is built into the price is constantly asked every time the halving is performed. However, unlike previous halving cycles, bitcoin hit a new all-time high of $73,836 ahead of the fourth halving today, March 12 – something analysts at crypto exchange Coinbase supported earlier this month in favor of pricing during this period.
Investment bank JPMorgan agrees. “We do not expect the price of bitcoin to increase after the halving, as it has already been priced in,” analysts led by Nikolaos Panigirtzoglou wrote in a report on Wednesday, reiterating their earlier similar views. “In fact, we see a decline in the price of bitcoin after the halving for several reasons.”
Their reasons include the fact that Bitcoin is still in “overbought conditions,” according to an analysis of open interest for Bitcoin futures. Additionally, bitcoin’s price is still well above JPMorgan’s volatility-adjusted price of $45,000 against gold and remains above its projected cost of production after a $42,000 halving, they reiterated. analysts.
However, others disagree. John Glover, former chief executive of Barclays Bank and current CIO of crypto lending platform Ledn, has warned market participants to be patient, arguing that it will take time for the reduction in new supply to have an impact on the market.
“While many participants focus on the historical impact that halvings have had on the price of BTC, few talk about how long it typically takes to come to fruition. Each halving has resulted in spikes price (before a significant correction) between 10 and 16 months after the event. The key here is patience, but as we know, people rarely let their profits slide,” Glover said.
“This halving will trigger a huge supply shock in the system. With current US ETFs being 5-10 times daily supply, post-halving demand would be 10-20 times supply,” added Samson Mow, CEO of Bitcoin technology company JAN3.
“Bitcoin halving is taken into account for the 0.1% of the world’s population who understand it,” Dan Held, general partner at the Bitcoin-focused venture capital firm, told The Block. “The other 99.9% don’t pay attention. »
Is this time different?
Beyond price action, increased participation in the Bitcoin market via the recently launched Bitcoin spot exchange traded funds in the United States is certainly a differentiator this time around.
“The fourth halving also declined at a time when institutional engagement has increased significantly, since the last halving occurred in 2020,” said Alex Cable, VP of Chainalysis’s WEMEA region.
In January, spot bitcoin ETFs from BlackRock, Fidelity and others began trading in the United States, and applications for spot bitcoin ETFs from China Asset Management, Harvest Global, Bosera and HashKey were subsequently approved by the Hong Kong Securities and Futures Commission earlier this week.
“Institutions are not just entering the market, they are now shaping its trajectory, bringing with them a new level of credibility, stability and interest from the traditional financial sector. Bitcoin’s growing integration into the global economy opens up entirely new avenues for its demand and utility,” Cable added.
Spot bitcoin ETFs are off to an impressive start this year, generating more than $12 billion in combined net inflows in just a few months. However, Bitcoin ETF spot flows have slowed since peaking at a net daily inflow of $1.05 billion on March 12, according to The Block’s data dashboard. They are also currently undergoing a streak of net outflows of five consecutive trading days, totaling $319.1 million as the halving approaches.
“Spot Bitcoin ETFs have reshaped the structure of the Bitcoin market by establishing a new anchor for BTC demand,” Scott Shapiro, senior director of product at Coinbase, told The Block. the asset class as the rate of newly mined bitcoin decreases. While this does not necessarily indicate that we are about to embark on an imminent supply crisis, we believe that increased access to a broader capital base coupled with new dynamics on the supply side offer could. make the few months following this halving different.
Stronghold’s Beard agreed that the combination of reduced coin supply and increased demand would lead to further imbalance. “The recent price surge, supported by Bitcoin ETFs, is likely to generate more interest, creating a compounding effect. Given this, it would not be surprising to see the price of Bitcoin increase significantly over the next couple of years,” he said.
“This upward trend is potentially driven by increased interest from institutional investors in the United States, which also contributed to a slight escalation in market volatility during this period,” said Samir Kerbage, CIO of Hashdex , at The Block.
“We are monitoring bitcoin price action and whether any consolidation will follow the 7-month streak of positive performance. Continued demand from ETFs could offset any potential consolidation,” Kerbage added. The case for Bitcoin remains stronger than ever as institutional interest accelerates amid a favorable macro environment and positive on-chain developments.
Others argue that the halving this time around is more about narrative than anything else. “Daily supply will be cut in half, but as a percentage of average daily volume this is an insignificant amount,” said Claire Ching, Gemini’s institutional head. The price of bitcoin will remain skewed to the demand side of the equation, with ETFs and the institutionalization of bitcoin being a significant factor.
“I think the importance of Bitcoin’s halving is overblown. However, Bitcoin’s latest rallies are much more than a fad. Bitcoin is maturing with institutional adoption,” Stronghold’s Beard added.
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