Glassnode has suggested that the upcoming bitcoin halving might not result in a supply reduction that the market might have anticipated.
bitcoin Halving May Not Have Same Impact Due to Spot ETFs
In a new report, the on-chain analytics company glass node has discussed the impact that the upcoming bitcoin halving may have on the cryptocurrency economy.
The “halving” is a periodic event for btc where its block rewards (the rewards miners receive for adding blocks to the network) are permanently reduced by half.
This event is built into the currency code, meaning it happens automatically. The halving occurs every 210,000 blocks, or approximately every four years.
The next such event will take place sometime next month. Historically, the halving has been considered a major event for the asset due to how it influences its supply dynamics.
The block rewards that miners receive are the only way to put new btc tokens into circulation. Since they harden during these events, the cryptocurrency's production rate slows down after them.
As such, halvings are considered bullish events, and the price then increases due to restricted supply, as supply and demand dynamics would dictate.
“However, current market conditions differ from historical norms,” Glassnode states. The reason behind this is simple; Now there is something that never existed in the past: spot exchange-traded funds (ETFs).
Spot ETFs are investment vehicles that buy and hold bitcoin and allow their users to gain indirect exposure to the cryptocurrency's price action through them. Since spot ETFs are available on traditional exchanges, they may be preferable for those not looking to venture into digital asset platforms and wallets.
ETFs have therefore introduced a notable amount of new demand for the asset, and supply quickly left the market and entered these funds. To put this demand in perspective, the analysis firm has compared it to the amount of btc that miners emit daily on-chain.
<img decoding="async" class="alignnone aligncenter" src="https://technicalterrence.com/wp-content/uploads/2024/03/This-Bitcoin-Halving-May-Not-Result-in-a-Reduced-Supply.png" alt="bitcoin Miner Issuance vs. Spot ETF” width=”1800″ height=”1013″ loading=”lazy” data-recalc-dims=”1″/>
The trend in the spot ETF flows and miner issuance since the start of the year | Source: bitcoin-halving-2024/" target="_blank" rel="nofollow">Glassnode
As the chart above shows, bitcoin ETF flows have generally been much higher than what miners have been introducing into circulation. Based on this, Glassnode believes that “the upcoming halving may not result in the supply reduction that had been anticipated.”
The report further says:
In essence, ETFs are preventing the impact of the halving by already adjusting available supply through their substantial and ongoing purchasing activity. In other words, the reduction in supply that is normally expected due to halvings may already be in effect due to large-scale bitcoin acquisitions by ETFs.
However, something to keep in mind is that it is not certain that ETFs will always be a bullish influence for the market. If the current regime of large inflows were to become one dominated by outflows, the cryptocurrency could naturally witness extraordinary selling pressure.
In fact, ETF spot net flows have been negative for bitcoin for four consecutive days, so that trend reversal may already be in action.
btc Price
bitcoin had recovered past the $68,000 level yesterday, but the coin has since fallen again, falling towards $64,200.
<img loading="lazy" decoding="async" class="alignnone size-medium aligncenter" src="https://technicalterrence.com/wp-content/uploads/2024/03/This-Bitcoin-Halving-May-Not-Result-in-a-Reduced-Supply" alt="bitcoin price chart” width=”1534″ height=”854″/>
Looks like the price of the asset has has retraced a chunk of its recovery | Source: BTCUSD on TradingView
Featured image by Traxer on Unsplash.com, Glassnode.com, TradingView.com chart
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