As the Bitcoin (BTC USD) As the halving event approaches, investors are closely watching the supply-demand dynamics. After Saturday’s sell-off, net inflows into spot Bitcoin ETFs on Monday were expected to influence demand for the halving. According to Bitcoin Halving Countdown, the event is expected on Friday, April 19, or Saturday, April 20, depending on how many blocks are pushed through in the coming days.
As the event approaches, both the Greed Index and Bitcoin Fear are moving closer to the “Extreme Greed” department. On April 15, the index rose from 72 to 74, indicating a possible BTC decline. Spot ETF market flow data shows net outflows of $82.8 million in the week ended April 12, which could influence near-term trends. Michael Saylor, founder and chairman of Microstrategy (NASDAQ:MSTR), released a performance chart on Sunday highlighting these trends.
Here’s what investors want to know ahead of this crucial halving event.
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Turbulence on the weekend
On April 13, the cryptocurrency market began experienced significant sell-offs after an unprecedented Iranian attack on Israel. Bitcoin fell 8% late Saturday and recovered from below $62,000 to above $64,000 on Sunday morning. This was Bitcoin’s sharpest decline in over a year and contrasts with recent record highs driven by inflows into US spot Bitcoin ETFs.
Overnight, Iran launched its first direct attack on Israel in the Middle East, with Israel claiming to have neutralized 99% of identified threats. The attack was reportedly triggered by an Israeli attack in Syria, which led to a significant decline in Iran’s currency.
On Sunday, Bitcoin rose 1.74%, recovering from Saturday’s 3.78% decline to close at $66,013, breaking a three-day losing streak. Investor sentiment improved after news that Iran had warned Israel of Saturday’s attack, easing fears of immediate retaliation.
Events before the halving
As the Bitcoin halving approached, increased demand from Ordinals traders increased transaction fees to 90 sats/vByte ($8.50 per transaction). Their increased activity, reaching over 162,000 transactions daily, pushed the “daily registration fee spent” to $1.24 million in 30 days.
James Van Stratten, a CryptoSlate analyst, noticed rising Bitcoin fees, possibly surpass Ethereum (ETH-USD) due to the impact of the halving. Speculation points to increased trading activity before the halving, which reduced the supply of new Bitcoins. Casey Rodamor’s launch of “Runes” could drive fees further higher and spark a memecoin trend in Bitcoin amid high L1 activity.
According to data from Coinglass, almost 300,000 traders faced liquidation last 48 hours, totaling approximately $936.12 million. With the Bitcoin halving imminent, the recent market decline aims to shake off weaker traders and attract those with stronger convictions.
Bitcoin’s current trend appears to be sideways, with resistance at $73,800 and support at around $67,921, reflecting ongoing buyer pressure. With Bitcoin’s market cap at around $1.2 trillion and daily trading volume at $42 billion, a rebound from support could boost momentum towards a retest of the all-time high.
The difference between the 2024 halving and previous ones
Will the 2024 Bitcoin Halving Redefine Cryptocurrency Adoption? With Bitcoin ETFs launching alongside the halving, the market landscape could change dramatically following the event. This article explores the potential impacts, from disrupting traditional narratives to shaping mainstream crypto adoption.
Previous Bitcoin halvings triggered significant price increases. In 2012, the reduction block was split from 50 BTC to 25 BTC, causing the coin to increase 83x. During the 2016 event, the increase was more than 30x, resulting in a price per BTC of $20,000. In 2020, it saw a steadier increase, with only a 5x increase and $60,000 per BTC.
Historical price trends suggest a post-halving increase, but relying on this alone carries risks. The stock-to-flow model, which correlates scarcity with price, has limitations. Previous halvings that coincided with significant events such as the 2012 European debt crisis demonstrate broader economic influences on Bitcoin interest.
The 2024 halving is marked by the emergence of US spot Bitcoin ETFs, changing investment patterns and market dynamics. The shift goes beyond reducing miner rewards and represents a significant shift in the Bitcoin landscape. The approval of these ETFs expands investor access, drives mainstream adoption and alleviates post-halving selling pressure with $12.1 billion in inflows.
In the past, halvings resulted in selling pressure from reduced miner revenue, but Bitcoin ETFs aimed to offset this with fresh capital. The influx of ETFs could counter post-halving selling pressure and mirror previous halving effects.
What to expect after the halving
One analyst believes Bitcoin miners’ sales, totaling up to $5 billion, could continue for four to six months after the halving. Past cycles suggest significant Bitcoin outflow from miners during this period, which could potentially influence Bitcoin’s sideways movement in the coming months.
Markus Thielen, Head of Research Analyst at 10x Research, expects great things after the halving event.
Thielen suggested a possible six-month “summer lull,” mirroring previous patterns that saw Bitcoin trade between $9,000 and $11,500 post-halving. Based on historical trends, this year’s halving around April 20 may not see significant upside until October.
Additionally, miners tended to accumulate BTC, which created an imbalance between supply and demand and drove Bitcoin prices higher before the halving. The Trend was noticeable in 2024, BTC rose around 70% to a record high of $73,734 before correcting to below $63,000 in mid-April.
Thielen suggested that altcoins could be the hardest hit, as many have seen significant declines recently and remain far from their 2021 highs. Despite predictions of an altcoin rally post-halving, historical data suggests that such rallies typically begin around six months later.
Furthermore, he suggested this Marathon (NASDAQ:MARA), the world’s largest Bitcoin miner, has likely amassed inventory that will be sold gradually after the halving to avoid fluctuations in sales. Marathon produces 28 to 30 BTC daily, which could mean an additional 133 days of supply, plus post-halving production of 14 to 15 BTC daily. If other miners adopt similar strategies, up to $104 million worth of BTC could be sold daily, potentially reversing the supply-demand dynamic.
Marathon CEO Peter Thiel mentioned a Break-even rate of $46,000 per BTC after the halving and expects minimal price shifts in the following six months.
Bottom line
Of particular importance in the cryptocurrency market is the Bitcoin halving event, which occurs approximately every four years after 210,000 blocks are mined. This event, which reduces the circulation of new coins, helps regulate supply and demand by reducing block rewards for miners. The halving creates an imbalance between supply and demand and could potentially trigger a Bitcoin bull market.
The intertwining of ETF adoption and changing market dynamics provides a strong foundation for Bitcoin’s continued rise. Beyond the significance of Bitcoin, the event has broader significance for the crypto space. Investors must remain vigilant and adaptable given the complexities of the 2024 Bitcoin halving.
By staying informed, investors can take advantage of opportunities as they arise and effectively navigate potential hurdles. Certainly, this will be an important event to keep an eye on for those looking to trade Bitcoin in the coming months.
At the time of publication, Chris MacDonald did not hold, directly or indirectly, any positions in the securities mentioned in this article. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com’s publication policies.