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While halvings in the past have been correlated with rising prices, current economic conditions could disrupt that historical pattern, Goldman Sachs said in a recent note to clients. The bank said factors such as inflation and interest rates could influence how Bitcoin reacts to this halving.
Historically, after the past three halvings, the price of Bitcoin has increased significantly, but it has taken varying amounts of time to reach new highs. Goldman Sachs cautioned against assuming similar price increases will occur this time around.
“Caution should be exercised in extrapolating the impact of past cycles and halvings, given their respective prevailing macro conditions,” the bank advised.
The central argument is that the macroeconomic situation is no longer the same. Current economic factors such as high inflation and interest rates favor riskier investments such as Bitcoin, unlike past halvings when money supply was high and interest rates remained low.
Currently, U.S. interest rates remain above 5%, and recent data suggests the Federal Reserve has a longer-than-expected path to achieving its inflation target.
Bank of America is signaling a risk that the Fed won't cut rates until March 2025, but still expects a rate cut in December.
Supply and demand determine long-term outcomes
According to Goldman Sachs, short-term price movements around the halving may not have a significant impact on Bitcoin prices in the coming months. The bank believes supply and demand relationships and growing interest in Bitcoin ETFs will be bigger factors than the halving hype.
“Whether or not next week's Bitcoin halving will be a 'buy on rumors, sell on news events' will definitely have a small impact on Bitcoin.” [medium-term] Goldman Sachs said: “BTC price performance will likely continue to be driven by the aforementioned supply and demand dynamics and continued demand for BTC ETFs, coupled with the self-reflexive nature of the crypto market, which will likely lead to lower spot prices. will be a key determinant of the move,” Goldman Sachs said. .
A recent report from Bybit predicts that foreign exchange reserves could be depleted from Bitcoin within nine months. This fear of scarcity comes ahead of Bitcoin's halving, when new Bitcoins created per block are cut in half.
Meanwhile, demand is skyrocketing. According to Bloomberg, a recently launched spot-based Bitcoin ETF has amassed a staggering $59.2 billion in assets under management in just three months.
According to a recent report from 21Shares, Bitcoin’s rally could be brought ahead of schedule with the arrival of a spot Bitcoin ETF in the US.
Previously, Bitcoin typically took around 172 days to surpass its previous all-time high (ATH) and 308 days to reach a new cycle peak after a halving event. However, this cycle is different. Bitcoin has already established a new ATH in the last month, unlike previous cycles where it typically traded 40-50% below its ATH in the weeks leading up to the halving.
Bitcoin is currently trading at about $61,300, down about 3.5% in the past 24 hours, according to data from CoinGecko. There are only two days left until the expected birth.
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