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The biggest crypto event of the year is here. On April 20, 2024, Bitcoin (BTC) will undergo a halving for the fourth time since its inception, which will result in a 50% reduction in new BTC supply.
The past three halving events have all ushered Bitcoin bull runs in the months that followed. Will we see the same this time around?
In this article, you will find insights from the biggest crypto asset managers and investment firms in the world.
Learn what experts at BlackRock, Goldman Sachs, Coinbase Institutional, Grayscale, and six other notable institutes have to say about Bitcoin’s fourth halving event.
‘New Wave of Demand Expected’
Switzerland-based crypto asset manager 21Shares noted in a report that this halving cycle’s “unique demand dynamics”, following the approval of spot BTC ETFs in the US has resulted in Bitcoin miners selling less BTC on exchanges.
The group said:
“Prior to ETF approval, 77% of asset managers were reluctant to invest in Bitcoin. With Registered Investment Advisors overseeing around $114 trillion in the US, mandated to wait 90 days post-new product launches before investing, a mere 1% allocation to Bitcoin could trigger substantial inflows, nearly doubling its current market cap and resulting in a supply squeeze in the process.
“We’re starting to see the early innings of this with banks like Wells Fargo and Merrill Lynch providing access to spot Bitcoin ETFs to select wealth management clients, while Morgan Stanley is allegedly evaluating the Bitcoin funds for its brokerage platform.
“Cetera is also amongst the first wealth managers to officially roll out a formal policy on BTC ETFs, signifying that a new wave of demand is starting to roll in.”
The asset manager said that Bitcoin was following a “different path this time around” due to growing institutional adoption and expanding use cases.
Coinbase Institutional
‘4th Halving May Not Mirror Prior Cycles’
Coinbase Institutional was cautious about making post-halving Bitcoin price predictions based on historical market data.
David Duong and David Han of Coinbase Institutional said analyzing the impact of halving cycles based on BTC’s market performance is limited to “only three events.”
“As such, studies of the correlation between prior halving events and Bitcoin price should be interpreted cautiously, as the small sample size makes it difficult to generalize patterns from historical analysis alone.”
Duong and Han added that Bitcoin’s market dynamics have fundamentally changed following the launch of spot BTC ETFs in the US.
“With major institutional players now capable of taking exposure through these vehicles, Bitcoin’s response to the upcoming halving may not necessarily mirror its performance in prior cycles.
“We think it’s more important to understand the current technical supply vs demand setup to better understand Bitcoin’s performance potential,” said Duong and Han.
Goldman Sachs
‘Prevailing Macro Conditions Should Be Considered’
Like Coinbase Institutional, analysts at Goldman Sachs warned clients, in a note seen by Coindesk, from relying on past halving cycles to predict the price performance of BTC in 2024.
“Historically, the previous three halvings have been accompanied by BTC price appreciation after the halving, although the time it took to reach the all-time highs differs significantly.
“Caution should be taken against extrapolating the past cycles and the impact of halving, given the respective prevailing macro conditions,” noted Goldman Sachs.
“Whether BTC halving will next week turn out to be a ‘buy the rumour, sell the news event’ is arguably less impactful on BTC’s medium term outlook, as BTC price performance will likely continue to be driven by the said supply-demand dynamic and continued demand for BTC ETFs, which combined with the self-reflexive nature of crypto markets is the primary determinant for spot price action,” Goldman Sachs added.
VanEck
‘Bitcoin Mining Equities Outperformed Spot Price in Halving Years’
Matthew Sigel and Denis Zinoviev of VanEck said that Bitcoin’s fourth halving event is expected to profoundly impact the Bitcoin mining industry by reshaping profitability metrics and accelerating technological advancements in mining efficiency.
Sigel and Zinoviev added that Bitcoin’s hash rate is expected to dip as unprofitable miners exit. However, the dip in network hashrate is expected to be followed by a rise in efficiency and overall hash rate in the long run.
“We believe the halving will likely lead to consolidation within the mining industry, with smaller miners being squeezed out and larger players expanding their market share.
“However, this trend is already in place, as publicly traded miners now control a record % of the hash rate.
“Historically, Bitcoin mining equities have recovered strongly post-halving and outperformed the spot price in halving years,” said Sigel and Zinoviev.
BlackRock
‘Take a Measured Approach’
BlackRock, the issuer of IBIT, the largest spot BTC ETF by asset under management, in a report, called Bitcoin halving a mechanism for achieving Bitcoin’s disinflationary monetary policy.
The asset manager went on to remind readers that each subsequent halving has a smaller impact on Bitcoin’s inflation schedule.
“With about 94% of all Bitcoin already mined, future issuance represents a small fraction of the circulating supply, potentially reducing the comparison to historical halving events.
“Moreover, Bitcoin has been around since only 2009, so a sample size of just three prior halvings makes it difficult to place confidence in the accuracy of this narrative,” said BlackRock.
“One thing we can say with confidence is that Bitcoin is a volatile asset subject to large, short-term price swings.”
BlackRock added:
“The halving presents a good opportunity to remind investors to take a measured approach that not only considers the potential upside that could come from investing in Bitcoin, but also its volatility characteristics and risks.”
Fidelity
‘Bitcoin’s Stock-to-Flow to Surpass Gold’
In a report, Fidelity Digital Assets said that the fourth Bitcoin halving event will change Bitcoin’s stock-to-flow to surpass gold’s for the first time.
The stock-to-flow ratio is a metric used to quantify the scarcity of a commodity. The ratio divides the total created supply of a commodity minus the supply that has been consumed (stock) to the annual incremental production (flow).
“Commodities with a stock or supply that are difficult to double due to a low rate of production relative to existing supply have historically served as superior stores of value.
“Such commodities are largely used for investment purposes and occasionally industrial uses. On the other hand, consumable commodities that are susceptible to large increases in supply are less effective in storing value,” said Fidelity.
However, Fidelity highlighted that critics of the stock-to-flow ratio contend that the metric does not consider the demand for the commodity.
“While the stock-to-flow model has been relatively accurate in the past in demonstrating Bitcoin’s rise in market value and has been correlated to the rise in its stock-to-flow ratio, there is no guarantee that this correlation will continue in the future,” added Fidelity.
Grayscale
‘Post-halving Increase in BTC price Not Guaranteed’
Crypto asset manager Grayscale in a report said that a post-halving increase in Bitcoin price is not guaranteed.
Michael Zhao of Grayscale reasoned that given the highly anticipated nature of Bitcoin halving events, rational investors tend to buy in advance and drive prices higher before halving events.
Zhao also argued that post-halving price increases of the past cannot be solely attributed to halving events. He added that “broader economic context and its impact on investor behavior can also critically impact Bitcoin’s price.”
Zhao said that in addition to the spot BTC ETF launch in the US, the emergence of ordinals inscriptions made the current halving cycle different from the past.
“The success of ordinals has had its own effects on the Bitcoin network. As block rewards diminish over time, the question of how miners will be incentivized to secure the network becomes more pressing.
“With transaction fees from ordinals already constituting approximately 20% of total miner revenue, this emerging trend of ordinal activity presents a new path toward sustaining network security through increased transaction fees, for now,” said Zhao.
‘Few Miners Profitable if BTC Falls Below $40,000’
European alternative asset manager CoinShares’ Bitcoin mining-focused report said that Bitcoin mining expenses will likely rise to a range of $27,900-$37,800 per Bitcoin after the April 2024 halving event, up from a range of $16,800-$25,000 per Bitcoin.
The Bitcoin production cost is often considered as an anchor and the lower boundary for BTC prices.
CoinShares said Nasdaq-listed Riot Blockchain looked to be best positioned to navigate through the changes due to “efficient cost structures and long runway.”
The firm added that if the price of Bitcoin falls below $40,000 only a handful of miners – Bitfarms, Iris, CleanSpark, TeraWulf and Cormint – will continue to operate profitably.
“All the other miners will likely eat into their runway, eventually forcing further dilution of stock prices as they most likely raise equity or convert debt.”
Galaxy
A Bullish vs Bearish View on the Halving
US-based crypto firm Galaxy’s research team shared their bullish and bearish views on the impact of halving on BTC price.
Bullish view: Galaxy said that the halving event will not only reduce 50% of BTC block rewards but will also reduce the “absolute amount of selling from miners.”
Galaxy said:
“Many believe the reduction in supply growth corresponding to a reduction in sell pressure from the mining community led to an increase in the value of Bitcoin following the November 2012, July 2016, and May 2020 halvings and could do the same following the fourth halving.”
Bearish view: Since BTC’s price has scaled new all-time highs before a halving event for the first time, some market participants believe that “the market has adapted from the previous three halvings and already priced in this event.”
BTC halvings and crypto sentiment. Credit: Galaxy Research
Bitwise
CIO Hougan a ‘Bitcoin Halving Bull’
Matt Hougan, chief investment officer at Bitwise, said that the Bitcoin halving event will change the market conditions due to the change in the ratio of forced sellers vs willing sellers.
According to Hougan, Bitcoin miners are “forced sellers” because they are forced to sell BTC to cover their expenses. While, everyone else falls into the “willing seller” category.
“After the halving, however, miners will only produce roughly 450 Bitcoin per day. With the same demand, new investors will only be able to acquire 45% of their Bitcoin from forced sellers, while the remaining 55% must come from willing sellers,” said Hougan.
“I don’t think the market fully appreciates the size of the opportunity in the ETF market once wirehouses and the rest of the roughly $60 trillion U.S. wealth management industry are able to allocate to Bitcoin ETFs, which could start to happen as early as Q3.
“I also don’t believe the market has fully factored in the extent to which rising concerns about inflation will drive significant allocations.”
Historically, the Halving Has Been Good for Bitcoin’s Price Long-Term (a Look at the Data)
The change in bitcoin’s price in the year following the halving:
2012: 8,839%
2016: 285%
2020: 548%The change in bitcoin’s price in the month following the halving:
2012: 9%
2016: -10%… pic.twitter.com/aaXSakLfko— Bitwise (@BitwiseInvest) April 16, 2024
The Bottom Line
Halving is a fundamental part of the Bitcoin protocol.
The halving mechanism gives Bitcoin special monetary properties, distinct from traditional centralized monetary control that governs fiat currencies.
What happens next? Time will tell, but this kaleidoscope of views is worth considering as we head into the new, post-halving era.
