The realities of the Bitcoin halving are starting to set in slowly with the market making adjustments to accommodate the new dynamics. Miners, traders, investors and other stakeholders need to tread carefully as they are faced with new propositions that require them to tweak their strategies if they are to survive and thrive in the new post-halving era.
The per-block reward that miners received was halved on Saturday, going from 6.25 BTC to 3.125 BTC. The nominal value of all new coins added to the Bitcoin supply every day could decrease to $30 million as a result of the reward halving. That is five times less than the average daily demand for the U.S. spot ETFs, which is a notable decline.
Bitfinex Analysts foresee 5x rise in Bitcoin demand
The market has changed so much as a result of the recent halving of Bitcoin’s (BTC) mining reward that analysts at Bitfinex have projected that demand for cryptocurrencies might eventually exceed supply by five times. According to the analysts, the daily amount of fresh Bitcoin supply introduced to the market decreasing to $30 million is a significant amount that could have huge bearing on the market dynamics especially given the increased demand from Bitcoin ETFs over the past few months.
With the daily issuance rate declining post-halving, we estimate that the new supply added to the market (new BTC mined) would amount to approximately $40-$50 million in USD-notional terms based on issuance trends. It is expected that this could possibly drop over time to $30 million per day, including active and dormant supply as well as miner selling, especially as smaller miner operations are forced to shut down shop
The changes are already being felt in the market with a supply squeeze currently visible from the market. According to data from Glassnode, since the halving, the total amount of new coins released to the supply per day has decreased to 450 BTC from the pre-halving four-year average of about 900 BTC.
Supply Squeeze Expected to Tighten
On January 11, almost a dozen spot-based exchange-traded funds (ETFs) began operations in the United States, giving investors exposure to cryptocurrencies without having to buy any. In the upcoming months, Bitfinex anticipates that the average daily inflows into ETFs since their launch will stay the same.
Miner selling may decrease, however it’s unclear if they will. In order to finance equipment upgrades and guarantee the viability of operations after the halving, miners or entities in charge of minting coins depleted their coin stockpile in the months preceding the halving. According to data monitored by Glassnode, the quantity of coins kept in wallets connected to miners decreased by more than 18,000 BTC to 1.82 million BTC in the six months preceding the halving.
Bitfinex also made another interesting observation of increasing self-custody that could have a bearing on the Bitcoin demand and supply dynamics moving forward. As a result of investors once more taking direct custody of their coins, the supply side of the market is being weakened.
Current on-chain data indicates that Bitcoin exchange outflows are reaching peaks not seen since January 2023, suggesting that many investors are moving their holdings to cold storage in anticipation of price increases …. Meanwhile, the active selling by long-term holders has not precipitated the typical pre-halving price drop yet, indicating a robust absorption of this selling pressure by new market entrants
Conclusion
As a result of the recent halving of Bitcoin’s mining incentives, Bitfinex researchers have forecast that the market for cryptocurrencies might grow to five times its current size. The daily notional value of newly added coins to the market may fall to $30 million, much less than the typical daily demand for U.S. spot ETFs, with rewards half to 3.125 BTC each block. Increased investor custody of coins has resulted from this supply squeeze, which is demonstrated by a dramatic drop in the daily issuance of new coins. This might cause prices to soar despite forecasts of a correction.
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