Key Points
- Bitcoin’s price surged to $48,489 over the last weekend and managed to stay above $48,000 despite a partial retracement.
- Grayscale, the world’s largest digital asset manager, predicts that fundamental changes to Bitcoin’s demand and supply could significantly impact its price, especially after the Bitcoin halving event in April 2024.
- Grayscale’s report suggests that the introduction of Bitcoin exchange-traded-funds (ETFs) could be a new factor influencing the price after the halving.
- Bitcoin miners are preparing for the halving event by liquidating coins and raising funds. The report mentions a proposed $750 million equity raise by Marathon Digital.
- Miners could find a substantial revenue stream from transaction fees associated with Ordinals activity on the Bitcoin chain.
- The recent launch of Bitcoin ETFs could help absorb the selling pressure from Bitcoin miners.
- The introduction of nine Bitcoin ETFs on Wall Street could reshape the market structure by introducing a new, consistent demand source.
- Bitcoin ETFs have seen substantial demand, reaching an asset under management (AUM) of $10 billion within their initial 20 trading sessions by February 9.
Bitcoin experienced significant gains over the last weekend, with the price of the cryptocurrency reaching $48,489. Even after a partial retracement, Bitcoin has managed to maintain a value above $48,000.
Grayscale, the world’s largest digital asset manager, recently made a statement. It suggested that fundamental alterations to Bitcoin’s demand and supply could have a profound impact on the cryptocurrency’s price. This impact would be particularly noticeable after the Bitcoin halving event scheduled for April 2024.
The Impact of Bitcoin Halving
Historically, Bitcoin’s price has surged after each halving event. This is largely due to the reduced availability of Bitcoins after each halving. However, Grayscale believes that the introduction of Bitcoin exchange-traded-funds (ETFs) will introduce a new factor influencing the price post-halving.
The report from Grayscale notes that “beyond generally positive on-chain fundamentals, Bitcoin’s market structure looks beneficial to price post-halving”.
Miners Preparing for Bitcoin Halving
After the Bitcoin halving in 2024, the reward for mining will decrease from the current rate of 6.25 BTC per block to 3.125 BTC. To prepare for this transition, miners have been liquidating coins and raising funds, with a proposed $750 million equity raise by Marathon Digital mentioned in the report.
The deflationary mechanism of Bitcoin halving will mean a 50% reduction in their revenue. As the block rewards decrease and the mining difficulty of the Bitcoin network continues to rise, miners may find themselves in a challenging situation.
Bitcoin Ordinals: A New Revenue Stream for Miners
Despite the challenges, there is a silver lining for miners. Transaction fees associated with Ordinals activity on the Bitcoin chain could provide a significant revenue stream. According to Grayscale, miners have received over $200 million in transaction fees related to Ordinals, constituting approximately 20% of their total revenue from such transactions.
The revenue opportunity presented by Bitcoin Ordinals could help alleviate the selling pressure from Bitcoin miners. Additionally, the recent launch of Bitcoin ETFs could also help counter this selling pressure.
Role of Bitcoin ETFs
Grayscale suggests that the recent launch of nine Bitcoin ETFs on Wall Street could act as a counterbalance to the selling pressure from miners. The introduction of Bitcoin ETFs could absorb significant sell pressure, introducing a new, consistent source of demand and reshaping the market structure.
Bitcoin ETFs have seen considerable demand, with the newly launched products reaching an asset under management (AUM) of $10 billion within their initial 20 trading sessions by February 9. BlackRock’s iShares Bitcoin Trust leads the pack with BTC holdings valued at $4 billion, according to data from BitMEX Research.
Grayscale added, “A sensitivity analysis of daily net inflows […] suggests that at the higher end, the reduction in sell pressure could mirror the effects of another halving, fundamentally transforming Bitcoin’s market structure in a positive way”.
