In a significant shift from past patterns, the upcoming Bitcoin halving is less likely to swing the cryptocurrency’s price, according to a recent analysis by CryptoQuant. The report highlights growing demand from large investors as the primary influence on Bitcoin’s market value, overshadowing the traditional supply shock expected from the halving event. With Bitcoin’s open interest soaring to 30 times its level just days before the 2020 halving, the focus is shifting from scarcity to the appetite of large-scale holders.
Shifting Dynamics: Surge in Demand from Heavy Hitters Redefines Bitcoin’s Halving Effect
In a recent report by Cointelegraph, a new research report from crypto analysis firm CryptoQuant, the supply shock caused by the Bitcoin halving will have less of an impact on the price of Bitcoin than many investors expect.
“We argue that the effect of the halving has diminished as the new issuance of Bitcoin becomes smaller relative to the amount of Bitcoin sold from long-term holders,” CryptoQuant said.
Instead, the “key driver” affecting Bitcoin’s price after the halving this time will be increased demand from investors with significant Bitcoin holdings.
CryptoQuant writes that demand from whales holding between 1,000 and 10,000 Bitcoin has grown to “nearly its highest ever,” with 11% month-over-month growth.
While the Bitcoin halving reduces supply, which typically increases the price of Bitcoin, there were a few instances between 2021 and 2023 in which monthly demand from long-term holders exceeded supply.
However, the current gap between them is much wider than ever, implying that with an ongoing monthly supply shortage, the halving’s impact on Bitcoin price action may be less powerful than in the past.
Long-term holders accumulate approximately seven times more Bitcoin monthly than new Bitcoin entering the market.
“Permanent holders add as much as 200K Bitcoin per month to their balances, much more than the ~28K Bitcoin issuance. Bitcoin monthly issuance will decrease to ~14K after the halving,” it said.
Furthermore, total Bitcoin issuance has fallen to only 4% of the total available supply, a significantly lower proportion than before the previous Bitcoin halving.
“Issuance represents 69%, 27% and 10% of the total available Bitcoin supply before the 1st, 2nd and 3rd halvings,” wrote CryptoQuant.
After the 2016 halving, Bitcoin’s price rose by about 4,200% to $19,800, and after the 2020 halving, it rose by almost 683% to $69,000. The Bitcoin halving event occurs when Bitcoin miner rewards are cut in half. The upcoming halving will reduce block rewards from 6.25 to 3.125 Bitcoin.
Market sentiment peaks: Bitcoin poised for halving with rising optimism and open interest
According to CoinMarketCap data, Bitcoin’s current price is $68,764, which has risen by 7.12% in the past five days. However, other indicators suggest that investors remain optimistic that the upcoming Bitcoin halving, scheduled for April 20, will be a significant catalyst for Bitcoin’s price to move higher.
According to CoinGlass data, Bitcoin’s open interest (OI) is currently $78.36 billion, just 11 days before the halving. This is about 30 times higher than the OI volume recorded 11 days before the previous halving in May 2020, which was $2.61 billion.
OI represents the total value of all outstanding or unsettled Bitcoin futures contracts on exchanges. A rise in value indicates increased market activity and trader sentiment. Rekt Capital, a pseudonymous trader on X, suggested to his 447,000 followers that any Bitcoin price drop between now and the halving is likely to recover quickly.
“Do you realize whatever downside Bitcoin experiences before the halving, if any, will be the very last bargain opportunity in the 2024 pre-halving period ever?” Rekt stated in an April 9 post on X.
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