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Bitcoin Halving Impact Wanes, Demand From Whales Sets Price Course

Whales' Appetite for Bitcoin Now Trumps Halving Events in Price Influence

Thu, 11 Apr 2024, 09:56 am UTC

In a significant shift from previous patterns, the upcoming Bitcoin halving is less likely to sway the cryptocurrency's price, according to a recent analysis by CryptoQuant. The report highlights a burgeoning demand from major investors as the primary influence on Bitcoin's market value, overshadowing the traditional supply shock anticipated from the halving event. With Bitcoin's open interest soaring to 30 times its level just days before the 2020 halving, the focus shifts from scarcity to the appetite of large-scale holders.

Shifting Dynamics: Demand Surge From Heavy Hitters Redefines Bitcoin's Halving Effect

In a recent report by Cointelegraph, a new research report from crypto analytics firm CryptoQuant, the supply shock caused by the Bitcoin halving will have less of an impact on the price of Bitcoin than many investors expect.

"We argue that the effect of the halving has been diminishing, as the new issuance of Bitcoin gets smaller relative to the amount of Bitcoin selling from long-term holders," CryptoQuant said.

Instead, the "key driver" affecting Bitcoin's price following the halving this time will be increased demand from investors with significant Bitcoin holdings.

CryptoQuant writes that demand from whales holding between 1,000 and 10,000 Bitcoin has grown to "around its highest ever," with 11% growth month-on-month.

While the Bitcoin halving reduces supply, which typically raises the price of Bitcoin, there have been a few instances between 2021 and 2023 in which monthly demand from long-term holders exceeded supply.

However, the current gap between them is much broader than ever, implying that with an ongoing monthly supply deficit, the halving's impact on Bitcoin price action may be less potent than in the past.

Long-term holders accumulate approximately seven times more Bitcoin monthly than new Bitcoin entering the market.

"Permanent holders are adding as much as 200K Bitcoin per month to their balances, much more than the ~28K Bitcoin issuance. Bitcoin monthly issuance will decrease to ~14K after the halving," it stated.

Furthermore, total Bitcoin issuance has dropped to only 4% of the total available supply, a significantly lower proportion than before the previous Bitcoin halving.

"Issuance represented 69%, 27%, and 10% of total Bitcoin available supply previous to the 1st, 2nd, and 3rd halving," CryptoQuant wrote.

After the 2016 halving, Bitcoin's price increased by approximately 4,200% to $19,800, and after the 2020 halving, it increased by nearly 683% to $69,000. The Bitcoin halving event occurs when Bitcoin miner rewards are cut in half. The upcoming halving will reduce block rewards from 6.25 to 3.125 Bitcoin.

Market Sentiment Peaks: Bitcoin Gears Up for Halving with Soaring Optimism and Open Interest

According to CoinMarketCap data, Bitcoin's current price is $68,764, up 7.12% in the last five days. Other indicators, however, suggest that investors remain optimistic that the upcoming Bitcoin halving, scheduled for April 20, will be a significant catalyst for Bitcoin's price to rise higher.

According to CoinGlass data, Bitcoin's open interest (OI) is currently $78.36 billion, just 11 days before the halving. This is approximately 30 times higher than the OI volume recorded 11 days before the previous halving in May 2020, which was $2.61 billion.

OI represents the total value of all outstanding or unsettled Bitcoin futures contracts across exchanges. A rise in value indicates increased market activity and trader sentiment. Rekt Capital, a pseudonymous trader on X, suggested to his 447,000 followers that any Bitcoin price drop between now and halving will likely recover quickly.

"Do you realize whatever downside Bitcoin experiences before the halving, if any, will be the very last bargain-buying opportunity in the 2024 pre-halving period ever?" Rekt declared in an April 9 post on X.

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