With the recent launch of spot bitcoin exchange-traded funds (ETFs) in the U.S., the cryptocurrency market is on the lookout for the next catalyst that could potentially drive gains. The approval of bitcoin ETFs by the U.S. Security and Exchange Commission (SEC) has generated both excitement and disappointment, underscoring the dynamic nature of a market influenced by hype.
The top three bitcoin ETFs have witnessed significant capital inflows, surpassing half a billion dollars. This surge, excluding Grayscale’s $22 billion fund, indicates substantial customer demand for conventional entry points into bitcoin. In the lead-up to the SEC’s approval on Wednesday, Jan. 10, bitcoin experienced a rally, reaching a recent high of approximately $48,000.
As market analysts and traders speculate on future trends, attention turns to the upcoming bitcoin halving – an event where the issuance rate of new bitcoins to network validators, or miners, is halved. The question arises whether these programmed events, occurring every four years, are already factored into the market prices.
The recent approval of bitcoin ETFs could offer insights into what might unfold in the next bitcoin hype cycle. The listing of 11 new bitcoin funds presented a selling opportunity, retrospectively evidenced by bitcoin’s subsequent dip of around 12% to $42,250. The true impact of bitcoin ETFs, attracting new dollars and investors, remains uncertain and hinges on the actual demand for bitcoin.
Contrastingly, the bitcoin halving narrative revolves around the supply side, suggesting that a constrained supply of new coins entering the market could boost bitcoin’s price, assuming steady or increased use of the Bitcoin network.
Despite the post-hoc rationalization of bitcoin’s price surges following previous halvings, there is skepticism about a direct correlation. CoinShares’ “Mining Report” points out that hashrate growth peaks about four months before the halving, possibly due to a ‘Bitcoin rush,’ indicating positive sentiment.
The economic logic behind a bitcoin supply shock is questioned, considering that new bitcoins will continue to be mined for the next century, reaching the total limit of 21 million. CoinShares doesn’t provide a price prediction but suggests increased competitiveness and a potential “miner exodus” post-halving.
The report highlights that if bitcoin prices remain above $40,000, it may lead to lower miner returns, potentially impacting selling pressure from miners. While some view the halving as a positive catalyst for bitcoin prices, it’s crucial to acknowledge diverse perspectives and incentives, recognizing that the halving remains another moment for hype in the ever-evolving world of cryptocurrency.
