The anticipation surrounding Bitcoin’s halving event has traditionally been accompanied by fervent speculation about its impact on the cryptocurrency’s price. However, according to a recent research report from crypto analytics firm CryptoQuant, the expected supply shock from the halving may not have the same dramatic effect on Bitcoin’s price as previously anticipated.
In their April 9 research report, CryptoQuant challenges the notion of a significant price surge post-halving, citing diminishing effects due to various factors. One key argument is the shrinking impact of the halving on new Bitcoin issuance relative to the amount sold by long-term holders.
The report notes that while the halving does reduce supply, the surge in demand from investors with substantial Bitcoin holdings, particularly whales holding between 1,000 and 10,000 Bitcoin, is a more critical driver influencing Bitcoin’s price dynamics post-halving.
CryptoQuant’s data reveals a substantial 11% month-on-month growth in demand from these large holders, reaching levels close to historical highs. This surge in demand from long-term holders has occasionally surpassed the supply, indicating a potential shift in market dynamics.
The gap between monthly demand from long-term holders and new Bitcoin issuance is now significantly larger than in previous years. This imbalance suggests a sustained monthly supply deficit, with long-term holders accumulating approximately seven times more Bitcoin per month than the new supply entering circulation.
The report highlights that permanent holders are adding a substantial 200,000 Bitcoin per month to their balances, far exceeding the new issuance of around 28,000 Bitcoin. Following the upcoming halving, monthly issuance is expected to further decrease to approximately 14,000 Bitcoin.
Furthermore, the total issuance of Bitcoin has dwindled to a mere 4% of the total available supply, a stark contrast to the proportions seen before previous halving events.
For context, after the 2016 halving, Bitcoin’s price surged by an astonishing 4,200% to reach $19,800, while after the 2020 halving, it rose by nearly 683% to $69,000. These historic price rallies were often attributed to the supply shock created by halving events.
The impending halving will see block rewards reduced from 6.25 Bitcoin to 3.125 Bitcoin, signaling a significant shift in miner rewards and inflation rates.
Despite these changes, Bitcoin’s current price sits at $68,764, marking a notable 7.12% increase over the past five days according to CoinMarketCap data. This ongoing price resilience amidst the anticipation of the halving underscores the evolving dynamics of Bitcoin’s market, where demand dynamics from large holders play an increasingly significant role in price movements.
As the cryptocurrency landscape continues to evolve, the traditional narratives surrounding halving events and their impact on prices may need to be reassessed. The CryptoQuant report suggests that a new normal in Bitcoin’s price dynamics could be emerging, where demand dynamics from institutional and large investors exert a more pronounced influence on price trajectories post-halving.
