The Bitcoin (BTC) halving is often cited as a catalyst for a price rally, but it may not be as positive as the market thinks thanks to the approval of spot exchange-traded funds (ETFs).
The halving, which occurs every four years, cuts Bitcoin's supply growth in half, creating the biggest upward pressure on the digital asset's price in history. Previous halvings have brought Bitcoin to new highs, but this time strong demand from spot ETFs could further fuel the rally.
“If you look at overall demand since the launch of ETFs, it's already caused a huge supply shock,” said Brian Dixon, CEO of investment firm Off the Chain Capital. “If the halving happens and supply decreases further, it’s logical to think that prices will rise.”
On the surface, that may be what the fund is asking for. has increased significantly More than 900 new BTC mined daily. And if that supply were cut in half, prices could fall even further.
However, things may not be the same this time.
Since January 11, when spot ETF trading began in the US, the price of Bitcoin has increased by 46%. Demand from these funds was so strong that digital asset prices rose to all-time highs to keep up. Onslaught of Bitcoin purchases. But the market may have gotten a little ahead of itself in the hype.
“This is the first time Bitcoin has hit a new all-time high before the halving, so there is some concern that ETFs may bring forward demand and possibly stay where we are for a while.” said David Lawant, head of research at FalconX.
Anthony Anderson, founder and CEO of Param Labs and Kiraverse, echoed this sentiment. “Bitcoin ETFs have pre-empted the impact of the supply halving by acquiring large amounts of BTC since the beginning of the year.”
The halving also likely won't affect ETF flows because demand from investors is already strong, at least in the short term, said James Seifert, an ETF analyst at Bloomberg Intelligence.
“We know that many miners use OTC desks to offload BTC, and ETF issuers also use OTC desks to obtain Bitcoin flowing into their funds. Hence the theory. In general, a potential halving of miners' Bitcoin sales could mean that ETF inflows will have a larger impact.''However, ETF inflows in recent months have been driven by miners “It's significantly more than what we provided from operations,” he said.
“So even if there is an impact, in my view it is unlikely to have a very large impact,” Seifert added.
This is not to say that halvings won't be an important catalyst for Bitcoin and ETF flows in the long run. After all, the success of the ETF appears to be closely correlated to the price of BTC, and vice versa. The halving may further emphasize Bitcoin's appeal as an asset class for institutional investors. “The halving will be one of the best things to happen to Bitcoin since the inception of ETFs,” said Bob Iaquino, co-founder of analysis firm Path Trading Partners. “At its core is an inflation protection mechanism, and inflation is accelerating again.”
In fact, the hype surrounding the halving may help bring Bitcoin to many investors looking for alternative assets to hedge against global macro volatility.
“this [Halving] “This is happening at a time when people are becoming somewhat nervous about the risks that Bitcoin hedges,” Rawant said, adding that many investors are looking into ways to protect their portfolios from significant changes in the global economy and holding spot ETFs. He pointed out that he was starting to pay more attention. And asset classes with shrinking supply “will be positive for ETF flows.”
Seifert said this shortage could have long-term implications for ETF flows as it impacts Bitcoin's “perpetual supply limit.” He added that while the marginal supply impact from ETF inflows during the first three months far outweighs the halving impact, the reduction in BTC supply is “permanent and will last forever.”
In any case, the market may need to brace for volatile short-term trading in Bitcoin, and perhaps ETF flows post-halving, Anderson said, with net flows of funds increasing significantly over the long term. I pointed out that it should be done. A similar pace to what we're seeing now.
