Key Points
- Bitcoin’s 2024 halving event could be impacted by the presence of Bitcoin ETFs, potentially softening the usual price retracement.
- Bitcoin ETFs, with their large institutional investment potential, could influence the Bitcoin market during the halving stages.
Bitcoin’s halving event, which occurs every four years or 210,000 blocks, has historically been followed by a price decline. However, this pattern may be altered by the introduction of Bitcoin (BTC) exchange-traded funds (ETFs), which could attract significant institutional investment.
Bitcoin Halving and ETFs
The 2024 Bitcoin halving is predicted to happen in April, marking the fourth such event in Bitcoin’s history. Halvings reduce the supply of new Bitcoin, ensuring its scarcity. Crypto analysis firm Rekt Capital identifies five stages in the halving process. The first two stages involve a pre-halving downside phase and a pre-halving rally. The third stage, a pre-halving retracement, is where Bitcoin ETFs are expected to play a crucial role. The fourth stage, reaccumulation, begins after the halving and may last up to five months. The fifth stage is the parabolic uptrend, where the Bitcoin price can recover and hit a new all-time high.
In January, the United States Securities and Exchange Commission (SEC) approved 11 Bitcoin ETFs to be listed and traded on traditional exchanges. This decision has allowed traditional investors to include Bitcoin in their portfolios, increasing demand for the cryptocurrency. Data shows that the demand for Bitcoin ETFs is substantial. On March 4, global Bitcoin exchange-traded products surpassed 1 million Bitcoin in assets under management. On March 5, Bitcoin ETF products reached a cumulative $10 billion in trading volume. This surge occurred while other ETF products recorded significant outflows, suggesting a potential investment shift toward Bitcoin ETFs.
Impact of Institutional Activity
The increase in demand for Bitcoin from traditional investors is unprecedented. Bullish market observers believe that the inflows through Bitcoin ETFs will serve as a hedge against falling prices during the retracement. The connection between Bitcoin ETFs and the Bitcoin halving will become apparent in the third and fourth stages of the halving process. These stages usually record falling Bitcoin prices as investors exit their positions. However, the inflows through Bitcoin ETFs could counteract the falling prices, providing a stronger base for the parabolic uptrend and resulting in even higher highs at the fifth stage.
However, some experts are skeptical that the inflows through Bitcoin ETFs can provide this opportunity during the 2024 halving. Nicholas Sciberras, a senior analyst from Collective Shift, argues that while Bitcoin ETFs could bring in enough inflow to hedge against the selling pressure, they could also contribute to the selling pressure if the demand for Bitcoin ETFs doesn’t continue as positively as it is today. JPMorgan predicts a bearish scenario where Bitcoin could fall as low as $42,000 after the halving. The bank expects the prices to follow the usual halving sequences and fall significantly after the halving hype is over.
It’s impossible to be 100% certain about anything in the crypto market. While Sciberras’s scenario is possible, there is less than a month to the halving, and judging by the performance of the Bitcoin ETFs, the bearish scenario seems unlikely. However, while most of the community expects Bitcoin ETFs to benefit from some of the halving stages, only time will tell to what extent they will affect them, if at all.
