Bitcoin
Bitcoin Outlook Improves Despite Recent Price Volatility Following April Halving
The fourth Bitcoin halving in April reduced the rate of issuance of new bitcoins to 3,125 BTC every ten minutes, sparking significant interest and speculation. Since then, Bitcoin has fallen from its highs, with some investors worried that the days of higher BTC prices are in the distant future.
We believe the new March high (above $70,000) was a “fake” driven by the new spot Bitcoin ETFs. However, considering the halving event and ongoing supply/demand issues, we expect a brighter future for BTC and crypto as the year progresses.
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Why do some experts think Bitcoin has outperformed? And why did the liquidation occur? Unlike previous halvings, Bitcoin’s price soared to a new high of $73,750 with a market cap of $1.44 trillion on March 14, a month before the halving. The rapid rise since the beginning of the year, when it was as low as $39,000, has spooked speculative investors and those who were in it for the “halving trade” into cashing out.
However, the pullback likely resulted from macro factors, specifically aggressive comments from the Federal Reserve. This triggered a “risk aversion” mentality, as an interest rate cut became more unlikely in 2024, making an increase possible. Since then, economic data has been weaker than expected, making an increase very unlikely for now. This move reactivated risk-on trading, setting an immediate floor in BTC prices, which have since recovered above $60,000. It also suggests a change in supply and demand factors for bitcoin, which appear favorable for higher prices.
There are several reasons to be optimistic about Bitcoin and crypto.
First, the last three halvings have consistently led to new all-time highs in the price of Bitcoin in the months following the event. We believe this trend will accelerate as more institutional investors include BTC in their portfolios, further tightening supply. This “rising tide” in BTC should lift all crypto boats.
Second, the launch of spot Bitcoin ETFs in January 2024 is a key development. These ETFs, which allow investors to trade stocks through existing retail brokerage accounts, promise greater availability through financial advisors. Companies like Merrill Lynch, Morgan Stanley, and LPL are conducting due diligence on their platforms for availability. Approval on these platforms seems inevitable, improving accessibility and simplifying the Bitcoin investment process, which will likely lead to much greater demand.
Third, regulatory developments in global crypto markets will significantly influence Bitcoin price dynamics. The potential approval of a US bill establishing a regulatory framework for cryptocurrencies and for Europe Regulation of Cryptoasset Markets (MiCA) is crucial. They will help dispel the notion that BTC and crypto are mere “pets” by recognizing them as stores of value with technological utility. This shift in perception could transform Bitcoin and crypto from speculative instruments into strategic investments and potentially a flight-to-quality investment.
Remember that a complex interplay between market dynamics, investor sentiment, technological advances, and macroeconomic events influences the price of Bitcoin. I am bullish on BTC and crypto and will closely watch the post-halving market continuation.
Note: The opinions expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates.