How will bitcoin’s price react after the halving?

With Bitcoin’s latest halving estimated to be around 9pm ET today – when the miners’ block subsidy reward will be cut from 6.25 BTC to 3.125 BTC – we asked several firms in the industry what impact this might have on bitcoin’s price action.

Bitcoin halvings (or as some call them, “halvings”) are associated with significant fluctuations in the cryptocurrency’s price. Although not a direct cause-and-effect relationship, these events often preceded significant bull runs in the bitcoin market.

“Historically, bitcoin has experienced remarkable price increases in the six months following each halving event. In fact, bitcoin has reached new all-time highs in each four-year period between the previous halving events,” Binance CEO Richard Teng told The Block .

“The main question everyone has is how will the bitcoin price react to the halving this time?” Kraken’s head of strategy, Thomas Perfumo, said. “Maybe the market cycle is kicking off earlier, but history suggests that we haven’t reached the end of the cycle either.”

Nansen Research analyst Aurélie Barthere agreed that bitcoin’s post-halving price return was generally better – five to six times greater in the 250 days after halvings compared to other years. “Right now the macro (high US rates for longer) in the US is forcing a correction in risk assets, including crypto, but our main scenario is that the upside remains intact for bitcoin,” Barthere said.

“While others look at the Bitcoin price on a technical basis and predict that it will rise, I, on the other hand, look at the basic fundamentals of supply and demand and draw the same bullish conclusions,” Greg Beard, CEO of Stronghold Digital Mining, added.

Is the halving ‘priced in’?

The question of whether the bitcoin halving is priced in is tossed around endlessly every time the halving happens. However, unlike the previous halving cycles, bitcoin hit a new high of $73,836 ahead of today’s fourth halving on March 12 – which analysts at crypto exchange Coinbase argued earlier this month was priced at around this time.

Investment bank JPMorgan agrees. “We do not expect bitcoin price increases after halving as it is already priced in,” analysts led by Nikolaos Panigirtzoglou wrote in a report on Wednesday, reiterating their previous similar views. “In fact, we see a downside to the bitcoin price post-halving for several reasons.”

Their reasons include that bitcoin is still in “overbought conditions,” according to an analysis of open interest in bitcoin futures contracts. Additionally, the bitcoin price is still well above JPMorgan’s volatility-adjusted price of $45,000 relative to gold and remains above its projected post-halving production cost of $42,000, the analysts reiterated.

However, others disagree. John Glover, a former managing director at Barclays Bank and current CIO at crypto-lending platform Ledn, warned market participants to be patient, arguing that the reduction in new supply will take time to affect the market.

“While many participants are focused on the historical impact that halvings have had on the BTC price, few talk about how long they typically take to materialize. Each halving has resulted in peak prices (before a major correction) between 10 and 16 months from the actual event The key here is patience, but as we know, people rarely let their gains run,” Glover said.

“This halving will cause a tremendous supply shock to the system. With current US ETFs at 5-10x daily supply, post-halving demand will be 10-20x supply,” added Samson Mow, CEO of bitcoin technology company JAN3.

“The Bitcoin halving is priced in for the 0.1% of the world’s population that understands it,” Dan Held, general partner at bitcoin-focused VC firm Asymmetric, told The Block. “The other 99.9% don’t pay attention.”

Is this time different?

Beyond the price action, increased participation in the bitcoin market by the recently launched spot bitcoin exchange-traded funds in the US is certainly a differentiating factor this time around.

“The fourth halving has also come at a time where there has been a significant increase in institutional engagement since the last halving took place in 2020,” said Chainalysis WEMEA Area VP Alex Cable.

In January, spot bitcoin ETFs from BlackRock, Fidelity and others began trading in the US, and spot bitcoin ETF filings from China Asset Management, Harvest Global, Bosera and HashKey were subsequently approved by Hong Kong’s Securities and Futures earlier this week. Commission approved.

“Institutions have not only entered the market, they are now shaping its trajectory, bringing a new level of credibility, stability and interest from mainstream finance. Bitcoin’s increasing integration into the global economy is paving brand new paths for its demand and utility,” Cable added.

The spot bitcoin ETFs have had an impressive start this year, generating more than $12 billion in combined net inflows over a few months. However, spot bitcoin ETF 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 enduring a net outflow streak of five consecutive trading days totaling $319.1 million leading up to the halving.

“Spot bitcoin ETFs reshaped bitcoin’s market structure going into the halving by establishing a new anchor for BTC demand,” Scott Shapiro, Senior Product Director at Coinbase, told The Block. “Consistent daily net inflows into these products could provide a massive tailwind for the asset class as the rate of newly mined bitcoin falls. the increased access to a wider capital base together with new supply-side dynamics can make the few months after this halving different.”

Stronghold’s Beard agreed that the combination of reduced coin supply and increased demand will lead to a further imbalance. “The recent rise in price, backed 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 rise significantly over the next two years ,” he said.

“This upward trend may have been driven by increased interest from institutional investors in the US, which also contributed to a slight escalation in market volatility during the time frame,” Hashdex CIO Samir Kerbage told The Block.

“We are monitoring bitcoin’s price action and whether a consolidation will follow the 7-month streak of positive performance. Continued demand from ETFs could offset any potential consolidation,” Kerbage added. “Regardless of how the halving plays out, we believe the investment case for bitcoin remains as strong as ever, as institutional interest accelerates amid a favorable macro environment and positive onchain developments.

Others argue that the halving this time is more about narrative than anything else. “Daily supply will be halved, but as a percentage of average daily volume, it’s an insignificant amount,” said Claire Ching, head of Institutional Gemini. The price of bitcoin will remain skewed to the demand side of the equation, with ETFs and the institutionalization of bitcoin a major driver of it.

“I do believe the importance of the bitcoin halving is being exaggerated. However, the latest bitcoin rallies are much more than a fad. Bitcoin is maturing with institutional acceptance,” Stronghold’s Beard added.

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