Bitcoin’s next big price catalyst is coming

But Nick Bishop, a professional bond trader turned founder of crypto consultancy NotCentralised, says the halving will not necessarily mean a surge in bitcoin price in the second half of 2024.

The former investment banking head at Gresham Partners adds that evidence suggests some professional crypto traders try to front-run hype around the halving by selling to less sophisticated investors in the months before the anticipated event.

Indeed, historical bitcoin price charts around the time of the last three supply halvings – in November 2012, July 2016 and May 2020 – suggest investors tend to take profits by selling as excitement builds ahead of halving events.

“To anyone who wants to act like a price sage, I would respectfully point out we’ve only had three data points from past halvings so far,” Bishop says.

“However, what we can say from those three instances is bitcoin prices peaked about 12 to 15 months before the halving event. Then, between three and six months after a halving event, the price has recovered to the prior peak that occurred 12 to 15 months before the halving.”

Risk proxy

Bishop says arguably a bigger driver of bitcoin’s price is its increasing correlation to other risk assets such as equities in traditional finance. That is, as big institutions such as BlackRock get involved, the bitcoin price is more likely to track traditional assets such as shares.

Online data shows a large proportion of the 19.5 million bitcoins in circulation are locked in cold storage or have not moved for more than six months, which suggests they’re owned by long-term holders – “hodlers” in crypto slang – with little interest in selling.

As a consequence, large institutional adopters in traditional finance such as Cathie Wood’s Ark Investments or the world’s largest asset manager BlackRock may be left scrambling to buy a relatively small free float of bitcoins estimated at between 2 million to 5 million.

“The more institutional interest we get, the more they’re chasing a somewhat constrained supply,” Bishop says.

“So, in a simplistic sense, if bitcoin demand stays the same then a halving means a higher price. But you’ve got all these real-world market interactions, the macro uncertainty, and the fact cryptocurrencies are highly correlated to risk assets. And as more institutions lean into bitcoin products like ETFs that will increase.”

The halving of the bitcoin awarded for verifying transactions occurs each time 210,000 separate blocks in its blockchain are mined, which is roughly every four years based on the 10-minute average time it takes the network’s hash rate (total computer power) to mine a single block.

According to Caroline Bowler, the chief executive of Australian crypto exchange BTC Markets, a smooth halving event should support the bitcoin price over the long term.

“I run BTC Markets, so I have to be bullish bitcoin,” she says.

“The halving is indicative of the fact bitcoin is a young technology and does what it says it will do, which is the expectation in the market. But if we saw problems, there would be immediate downward pressure on the price.”

The appeal of get-rich-quick and the public’s increasing cynicism around central banks’ money printing to support government spending has helped bitcoin’s price to rise more than 200 times in value over the past 10 years since August 2013.

Still, its future as a decentralised, apolitical and slightly crazy experiment in human psychology remains uncertain.

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