Key Points
- Following the Bitcoin halving, a surge in demand and a decrease in supply could lead to an “immense supply shock”.
- On the flip side, the halving could negatively impact Bitcoin miners’ revenue, potentially causing a drop in the hash rate.
After the recent halving of Bitcoin, the cryptocurrency market is bracing for interesting times. The halving event has set the stage for a potential bull run due to increasing demand from spot Bitcoin ETFs in the U.S and the anticipation of more from options trading and large wirehouses.
Increased Demand and Reduced Supply
Furthermore, the potential for ETFs in Hong Kong and other regions could grant access to even more investors. Concurrently, the supply of Bitcoin entering the market has significantly decreased, leading to predictions of a massive supply shock. In simple terms, the demand for Bitcoin could far outweigh its availability.
However, there is also a bear case for Bitcoin. The halving event has almost halved the revenue for Bitcoin miners. This could potentially decrease the number of profitable miners and lead to a decrease in the hash rate over time.
Offsetting Reduced Revenue
There are two potential ways to counter this. The first is through the price of Bitcoin. If the price of Bitcoin doubles, it could compensate for the impact of the halving. However, a decline in Bitcoin’s price could cause further distress for miners.
The second method is through transaction fees. There is some optimism here, with projects like Ordinals and Runes adding value to normal transactions. However, new products like ETFs are facilitating a lot of Bitcoin trading and investment without many on-chain transactions.
The future of Bitcoin could go either way. If the bull case occurs, a surge in demand from ETFs could create sustained momentum and attract more interest and adoption. On the other hand, if the bear case unfolds, a price drop could lead to selling pressure from ETFs and lower transaction fees. This, coupled with reduced mining rewards, could result in fewer miners maintaining the network’s security.
The halving event has occurred as expected, but the real test has only just started.
In other news, Avraham Eisenberg, accused of being behind the $110 million exploit of Mango Markets, has been found guilty of commodities fraud, commodities manipulation, and wire fraud. His sentencing is scheduled for July 29.
In addition, Tether has expanded its USDT stablecoin to the TON blockchain, allowing Telegram’s 900 million monthly active users to send the stablecoin to other users. Telegram has also made USDT transactions free until the end of June.
Lastly, Hong Kong has approved the applications of several spot Bitcoin and Ethereum exchange-traded funds. Asset managers in Hong Kong, including units of China Asset Management and Harvest Global, may launch their spot Bitcoin exchange-traded funds as early as later this month. However, predictions for potential inflows for these ETFs remain conservative, with estimates being lower than $500 million.
