Have Bitcoin ETFs weakened upside potential after... "Bisection"?

Bitcoin's upcoming halving – often seen as a bullish price catalyst – may not be as positive as many market participants think, thanks to the approval of Bitcoin spot funds (ETFs).

The “halving” process, which occurs every four years, cuts the rate at which new bitcoins are mined in half, historically causing price pressure on the largest digital assets.

Previous halvings have pushed Bitcoin to new highs, and this time, strong demand from spot Bitcoin ETFs could provide additional momentum to this upward move.

“If we look at the overall demand since the introduction of Bitcoin ETFs, it has really created a massive supply shock,” said Brian Dixon, CEO of investment firm Off the Chain Capital.

He added: “Once the halving process takes place and the supply decreases further, it would be logical to believe that the price will increase. »

At first glance, this may be true since demand for Bitcoin ETFs has increased by over 900 new Bitcoins mined daily. When that supply halves, it could put more pressure on prices.

However, things might not turn out that way this time.

Read also: Despite the current trend… Will Bitcoin reach $150,000 thanks to the halving?

The new dynamics of the Bitcoin market

The price of Bitcoin has increased 46% since January 11, when Bitcoin spot ETFs began trading in the United States. The demand for these funds was so strong that... BTC Price It reached a record high to cope with the strong wave of purchases. But the market may have gotten a bit ahead of itself with the hype.

“This is the first time Bitcoin has broken its all-time high before the halving, so there is some concern that Bitcoin ETFs have driven demand,” said David Lawant, head of research at FalconX. "A little bit, and maybe we'll stop where we are right now for a while."

Anthony Anderson, founder and CEO of Param Labs and Kiraverse, echoed this sentiment, saying: “Bitcoin-related ETFs anticipated the supply impact of the halving by increasing their purchases of... BTC currency Significantly since the start of the year.

Additionally, the halving may not impact Bitcoin ETF flows due to already strong investor demand, at least in the short term, according to Bloomberg Intelligence Bitcoin ETF analyst James Seyffart.

He said: "We know that many crypto miners are using OTC trading desks to sell their Bitcoins, and that Bitcoin ETF issuers are using OTC trading desks to acquire Bitcoins as money flows into the fund. So in theory, a potential halving of miners' Bitcoin sales could mean that Bitcoin ETF inflows would have a greater impact on the underlying market, but over the past few months, Bitcoin inflows ETFs have far exceeded anything miners have provided through their operations.

“So if this process has some impact, it is unlikely to have a very large impact in my opinion,” Seyphart added.

Read also: JP Morgan expects Bitcoin to fall to $42,000 after halving

The Long-Term Impact of Bitcoin Halving

This does not mean that the halving will not be an important catalyst for Bitcoin and Bitcoin ETF flows in the long term. After all, the success of Bitcoin ETFs seems closely linked At the BTC price vice versa. The halving could confirm Bitcoin's appeal as an asset class for institutional investors.

“I think a halving would be one of the best things for Bitcoin since Bitcoin ETFs launched,” says Bob Iacchino, co-founder of analytics firm Path Trading Partners. “At the heart of Bitcoin is a mechanism to protect against inflation, and inflation is taking place. “On the rise.”

In fact, the hype around the halving could help put Bitcoin in front of many investors looking for alternative assets to protect against global volatility in the global economy.

“This (halving) is happening at a time when people are somewhat concerned about the risks that Bitcoin is hedging,” David Luant said. Highlighting that many investors are starting to pay more attention to how to protect their investment portfolios against any major changes in the global economy, owning spot ETFs and an asset class whose decreasing supply will be “positive for Bitcoin ETF flows.”

This supply shortage could also have a long-term impact on Bitcoin ETF inflows, as it will permanently impact Bitcoin's "margin supply," according to Seyfart.

He added that while the marginal supply impact of Bitcoin ETF inflows in the first three months was much greater than what a halving would have been. The reduction in BTC supply is “permanent and will last forever.”

Whatever the end result, Anderson says, the market will likely need to prepare for volatile short-term trading in Bitcoin and possibly an influx of Bitcoin ETFs after the halving. Highlighting that in the long term, net fund inflows are expected to occur at a similar rate to what we are currently seeing.

The article has been translated into Arabic (here)