Key Points
- Bitcoin’s (BTC) price may face bearish pressure due to a drop in Bitcoin ETF purchases and unrealized gains from traders.
- The upcoming Bitcoin halving event might also impact the cryptocurrency’s price.
A decrease in Bitcoin exchange-traded funds (ETFs) purchases, coupled with a high amount of unrealized gains from traders, could potentially place bearish pressure on the Bitcoin price after the halving event.
Bitcoin ETFs and Unrealized Profits
Julio Moreno, research lead at CryptoQuant, suggests that unrealized profits from Bitcoin’s recent rally are accumulating a selling pressure. This, alongside a possible reduction in ETFs purchases in the near future, could exert further pressure on BTC prices.
CryptoQuant’s Net Unrealized Profit and Loss (NUPL) indicator supports Moreno’s analysis. The indicator’s cautionary marker is 0.7, signaling that Bitcoin investors might be preparing to realize profits, potentially driving prices down and escalating selling pressure.
Bitcoin ETFs and the Halving Event
On March 17, the NUPL indicator reached 0.606, a 0.41% increase from the previous day, in spite of recent BTC price corrections. Moreno highlighted two potential price-depressing factors: a slowdown in Bitcoin ETF purchases and entering the halving with a high level of unrealized profits for traders.
Bitcoin ETFs had one of their lowest net inflow days on March 14, with just $132 million in net activity. This was their lowest level in eight trading sessions and an 80% drop from previous days. However, a potential downward trend might not be as severe as past bear markets.
Bitcoin ETFs have generally been in high demand, with cumulative net inflows into crypto products surpassing the $12 billion mark on March 15. The industry anticipates further demand as brokerage firms accelerate due diligence to offer clients Bitcoin ETFs.
Miners Prepare for Halving Impact
The capital flowing through Bitcoin ETFs is counterbalancing the negative price effects of miners’ sales ahead of the halving. The halving event, Bitcoin’s deflationary mechanism, reduces the reward for mining new blocks by 50%, thereby decreasing the rate at which new Bitcoin are generated.
This year’s reduction will cut Bitcoin miners’ rewards from 6.25 BTC to 3.125 BTC per block. The cost of mining, however, will stay the same or may even increase as miners typically enhance operations to remain profitable post-halving.
Historically, miners sell more of their BTC reserves before halving to maximize profits. This year is no different, with miner reserves at their lowest level in two years, holding 1.81 million Bitcoin on March 15.
The Bitcoin halving takes place every four years, with the next event expected to occur around April 19, 2024.
