The upcoming Bitcoin (BTC) halving is likely a bullish development, but a slew of outside factors mean it likely wonât play out the same as in previous years, according to Grayscale.
Last month, the company successfully converted its Grayscale Bitcoin Trust (GBTC) into the worldâs largest Bitcoin ETF. The introduction of such ETFs, according to Grayscale, may impact Bitcoinâs price as if it were a second halving within a single year.
In a Friday blog post, the firm explained:
Since launching last month, Bitcoin ETFs have absorbed a cumulative $2.6 billion of inflows.
By contrast, the âhalvingâ is when the Bitcoin network cuts the number of newly issued coins within each Bitcoin block in half. This occurs roughly once every four years, with the next halving set to reduce Bitcoinâs block reward from 6.25 BTC to 3.125 BTC in April.
Grayscale noted that the event is historically followed by heated bull markets to new all-time highs in the following year. However, attributing these rallies solely to Bitcoinâs declining supply inflation may be oversimplifying history.
âIt seems that these periods coincided with significant macroeconomic events,â wrote Grayscale, highlighting the assetâs boom in 2020 after the COVID-19 pandemic prompted the government to implement massive financial stimulus measures.
Though macroeconomic winds remain uncertain, the market is currently pricing in a 50% likelihood of the Federal Reserve beginning to cut interest rates in May, according to CME Fedwatch.
Aside from Bitcoinâs price itself, halving events also tend to coincide with a washout among less efficient players in the mining industry, who can no longer afford to operate with only half of the previous BTC reward.
With network hashrate rising and the block subsidy falling, Grayscale said miners might find themselves in a âtense positionâ in the near term.
Thereâs a silver lining, however: Bitcoin miners have the benefit of Ordinals this year, which have driven up Bitcoin network activity, transaction fees, and miner revenue independent of Bitcoinâs fixed block reward and halving schedule.
While higher fees may hurt Bitcoinâs use case for payments, Grayscale added that Ordinals have inspired new innovations on Bitcoin that help address scalability issues. For example, some startups have already announced new rollup technologies that let users bridge Bitcoin to more scalable blockchains.
âThese dApps represent the forefront of Bitcoinâs transition into a multi-faceted ecosystem, capable of supporting a wide array of blockchain-based applications,â Grayscale said.
The post Why This Yearâs Bitcoin Halving Is âActually Differentâ: Grayscale appeared first on CryptoPotato.
Last month, the company successfully converted its Grayscale Bitcoin Trust (GBTC) into the worldâs largest Bitcoin ETF. The introduction of such ETFs, according to Grayscale, may impact Bitcoinâs price as if it were a second halving within a single year.
Are Bitcoin ETFs A Second Halving?
In a Friday blog post, the firm explained:
Since launching last month, Bitcoin ETFs have absorbed a cumulative $2.6 billion of inflows.
By contrast, the âhalvingâ is when the Bitcoin network cuts the number of newly issued coins within each Bitcoin block in half. This occurs roughly once every four years, with the next halving set to reduce Bitcoinâs block reward from 6.25 BTC to 3.125 BTC in April.
Grayscale noted that the event is historically followed by heated bull markets to new all-time highs in the following year. However, attributing these rallies solely to Bitcoinâs declining supply inflation may be oversimplifying history.
âIt seems that these periods coincided with significant macroeconomic events,â wrote Grayscale, highlighting the assetâs boom in 2020 after the COVID-19 pandemic prompted the government to implement massive financial stimulus measures.
Though macroeconomic winds remain uncertain, the market is currently pricing in a 50% likelihood of the Federal Reserve beginning to cut interest rates in May, according to CME Fedwatch.
A New Dawn For Bitcoin Miners and Developers
Aside from Bitcoinâs price itself, halving events also tend to coincide with a washout among less efficient players in the mining industry, who can no longer afford to operate with only half of the previous BTC reward.
With network hashrate rising and the block subsidy falling, Grayscale said miners might find themselves in a âtense positionâ in the near term.
Thereâs a silver lining, however: Bitcoin miners have the benefit of Ordinals this year, which have driven up Bitcoin network activity, transaction fees, and miner revenue independent of Bitcoinâs fixed block reward and halving schedule.
While higher fees may hurt Bitcoinâs use case for payments, Grayscale added that Ordinals have inspired new innovations on Bitcoin that help address scalability issues. For example, some startups have already announced new rollup technologies that let users bridge Bitcoin to more scalable blockchains.
âThese dApps represent the forefront of Bitcoinâs transition into a multi-faceted ecosystem, capable of supporting a wide array of blockchain-based applications,â Grayscale said.
The post Why This Yearâs Bitcoin Halving Is âActually Differentâ: Grayscale appeared first on CryptoPotato.
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