Halving Pools Burn: What to Expect in Bitcoin, Crash or New Highs?
“Traditionally, this phase of the Bitcoin market cycle has been very positive for investors. The future is unpredictable, but if we look at certain events during this halving we can find positive indicators about the way forward,” says Christopher Gannatti, head of analysis at WisdomTree.
The fourth halving in Bitcoin history is near. According to Christopher Gannatti, “It is written in the code that the block reward paid to bitcoin miners will go from 6.25 bitcoins to approximately 3.13 bitcoins once the blockchain reaches 840,000 blocks.
“We’ve seen these events before: rewards started at 50, dropped to 25, then 12.5, then 6.25. The process repeats until around 2040, at which point the block reward will approach zero. , and the 21 million bitcoins that will be issued in total will be in circulation. Currently, approximately 19.7 million of these maximum 21 million are in circulation,” adds this expert.
As detailed by Gannatti by means of a chart analysis, if the Bitcoin price is scaled on the halving day to 1.0, during the subsequent period of approximately 2.5 years there was a greater revaluation of the price in the three cases. In each of the historical halvings, which represent a period of the Bitcoin cycle, prices reached higher highs and higher lows.
“In this case, we can think of Bitcoin from a supply and demand point of view. If demand exceeds supply, the price should rise. The halving indicates that there is less supply of new bitcoins in the world, so if demand remains the same, the balance between supply and demand immediately tips in favor of demand exceeding supply,” says Gannatti.
US Bitcoin ETFs: A New Source of Demand
One of the most valued aspects of Bitcoin is the certainty of supply based on the protocol code over time. It is known that in 2040 there will be 21 million bitcoins and that nothing can happen to change this. The mintage of new coins is also known to halve approximately every four years.
Having just over two months of travel, the history of supply/demand in Bitcoin can be evaluated and some influence of ETFs can clearly be seen. Thus, the following can be observed:
More purchases than sales. A hypothesis advanced before the launch of ETFs considered that more types of investors (those who cannot create their own crypto portfolios, for example) would be able to access the exposure. The daily net flow of BTC into ETFs is absolutely skewed towards the positive end of the spectrum. It should be noted that there are still many investors working in companies where internal supervision has not yet issued general authorizations to widely use these products.
Purchase of ETFs exceeding the issuance of bitcoins. The purchase of bitcoins by ETFs has exceeded the creation of new bitcoins during this specific period by approximately 130,000 units. The space is transparent: we can see the purchase of ETFs, the portfolios and how much time has passed since individual units were moved.
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“Right now, it appears that demand for ETFs is high and that wallets are holding onto their bitcoin for longer. However, we also know that the halving is approaching, which will reduce new issuance. Each of these points leads to tighter supply and a potential increase in demand thanks to the ease of access introduced with the launch of bitcoin ETFs. If the wave of global adoption continues, everything points to another halving cycle with a strong. performance,” concludes Gannatti.
By Leonardo Perez