19 April 2024

Approximately 15 hours to go for the next halving, the fourth such event in Bitcoin’s short but transformational history. We have witnessed heightened volatility this month – as BTC prices fluctuate between $60,000 and $70,000, altcoins have shaved off some significant gains to the tune of 20-25%.

What will the halving bring? Will it be a narrative for next set of growth or will there be a short term sell-off given geopolitical and macroeconomic factors?

Today, in our Hot Take, we continue to analyse halving trends and the likely way forward. Before that, lets dive into the top-3 stories and macros of the week.

Top-3 stories of the week:

1

2

3

The newsletter is put together by Giottus Crypto Platform. You can read all the previous issues of Cryptogram here.

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WEEKLY MACROS

• Total crypto market cap - $2.26 trillion - DOWN 14.4%

• Bitcoin price - $62,215 - DOWN 4.5%

• The dollar index (DXY) - 106.24 - UP 0.8%

• Bitcoin Dominance - 55.45% -  UP 1.5%

• Crypto Fear and Greed Index - 66 - Market is in greed

THE HOT TAKE

Bitcoin halving: trends and tips

In our last week’s issue, we had briefly covered about the drivers leading to retail adoption. For today, we take a closer look at exploring the implications following tomorrow’s halving. Let's explore more trends.

Bitcoin reserves are depleting faster

While numerous analysts and experts argue that the effects of halving have already been factored into the market, we feel otherwise.

A recent study from Bybit, a crypto exchange, has warned about a potential shortage of Bitcoin on exchanges by the end of 2024 if demand stays high. If we have only 2 million BTC left and $500 million keeps pouring into Bitcoin Spot ETFs every day, roughly 7,142 bitcoins will be taken out of exchange reserves daily. This means that it will only take nine months to use up all the remaining reserves.

Stock-2-Flow Ratio is set to double post halving

Stock2Flow, refers to the ratio of the existing supply (stock) of a commodity to the annual production (flow) of that commodity. In simpler terms, it measures how much of a given asset is already in circulation compared to how much new supply is entering the market each year.

In regards to Bitcoin, S2F ratio is around 56 before the upcoming halving, while that of Gold is 60. After the halving in April 2024, Bitcoin’s S2F ratio is projected to double to 112. Unlike Gold or other commodities, Bitcoin becomes scarcer after each halving in terms of less new “production”.

Miner cost to increase

Hash rate is the measure of computation power required to mine a Bitcoin. After the 4^th halving, the hash rate is expected to rise, leading increased cost for miners to mine a Bitcoin.

CoinShares estimates that the direct costs of producing one Bitcoin will rise between $28,000 and $38,000 following the halving. This could lead to only professional miners with advanced rigs could survive and unprofitable miners might start selling their Bitcoin reserves in order to support their operations. There can be a sell-off in the short-term if this happens.

ETFs to drive demand

While the inflows have stopped in recent weeks for the ETFs, citing turbulent macro developments, the inflows have been consistent prior this month. Currently 90% of the BTC held by ETFs are controlled by top three ETFs namely GBTC (Grayscale), IBIT (BlackRock) and FBTC (Fidelity).

The iShares Bitcoin ETF (IBIT) made history by becoming the quickest ETF to reach the $10 billion milestone, achieving it in less than two months. This achievement surpasses the previous record held by the SPDR Gold Shares (GLD), which took over two years to reach the same milestone. Considering that Bitcoin ETFs purchase actual BTC, they contribute to the demand, which naturally drives up prices. For instance, IBIT alone holds more than 250,000 BTC, and when you combine all the spot bitcoin ETFs, they now account for nearly 6% of the global bitcoin supply.

When is a good time to buy Bitcoin

At current price levels of $62,000, we believe this serves as a good entry point to start accumulating Bitcoin. Bitcoin tends to rally for twelve months after each halving, and there’s a high probability that we might see a new high soon.

We had briefly covered about two opportunities to accumulate BTC in our past issue.

1. Buying the Dip: we believe that any dip below $65,000 are excellent entry points.

2. Re-Accumulation phase post halving: This is ideally the time price moves sideways post halving

What does the future hold for Bitcoin

PlanB, a popular crypto analyst predicts that Bitcoin could surpass $300,000 by 2025 and the typical selling around 18 months post halving is ideal. However, with the ETF’s impact, we believe this cycle could fast-forward and recommend taking profits along the way and especially around the 12-month timeframe post halving.

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If you have any questions or feedback for us, write to us at [email protected]. You can check out the previous issues here.

Disclaimer: Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. Please do your own research before investing and seek independent legal/financial advice if you are unsure about the investments.