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Bitcoin Chart Shows Simmering Potential

February 28, 2024

This long-term chart of Bitcoin looks full of potential. The price is breaking higher from three years of sideways trading supported by a golden cross buy signal from the moving averages. Not shown but even a 12m candlestick chart shows a potential golden cross.

Here is an explanation of what a Bitcoin halving means.

Few events in crypto are as highly anticipated as a Bitcoin halving.

The process, scheduled roughly every four years, plays a fundamental role in the top cryptocurrency’s raison d’être — it fulfills Bitcoin’s pseudonymous creator Satoshi Nakamoto’s plan to gradually reduce the supply of new coins.

That’s why market participants love halvings: Because Bitcoin miners aren’t earning as much Bitcoin anymore, they can’t sell the same amount as they used to. And with fewer Bitcoin for sale, if demand remains the same — or increases — then Bitcoin’s price naturally pushes higher.

The supply-side shock can be dramatic. Bitcoin rallied roughly 2,330pc within five months of its first halving in November 2012, and 2,876pc five months after the halving in July 2016. Its third halving in May 2020 had a more modest impact, but Bitcoin still surged 611pc in 11 months.

The fourth halving will likely occur on April 20, and it promises to have important consequences for Bitcoin miners and the cryptocurrency they rely on.

Halving mechanics

New Bitcoin is minted each time a network participant adds a new block to the blockchain, roughly every 10 minutes.

This is called mining, and it’s not an easy process. Miners consume enormous amounts of computational power and electricity in a bid to produce Bitcoin’s next block before their competitors do — thereby collecting Bitcoin rewards, as well as transaction fees.

Angry Texans fight Bitcoin mine’s 80,000 noisy machines in test for industry

Angry Texans fight Bitcoin mine’s 80,000 noisy machines in test for industry

When Cheryl Shadden invited her family from Washington state to visit her home in Texas she knew there were going to be issues.

But for philosophical and economic reasons, Nakamoto wanted Bitcoin to have a fixed supply. So they created a hard limit on the number of Bitcoin that could ever exist — 21m.

Halvings are a mechanism to ensure that Bitcoin issuance dwindles over time until it reaches Nakamoto’s target. The first halving cut Bitcoin block rewards from 50 Bitcoins to 25, the second to 12.5, and the third to 6.25. The fourth halving will slash miner rewards to 3.125 Bitcoin, worth about $178,000 at current prices.

This process is supposed to continue like this, cyclically, until the year 2140, at which point miners will be rewarded only with the network’s transaction fees.

Impact on Bitcoin

In most cases, Bitcoin miners sell the Bitcoin they earn to finance their operational costs. Miners have therefore been a consistent source of Bitcoin selling pressure throughout the asset’s history.

Because a halving cuts in half the amount of Bitcoin that miners earn, it also limits the amount of Bitcoin they can sell. The last three halvings were characterised by drastic reductions in Bitcoin selling, which in turn propelled Bitcoin’s price to new all-time highs.

It’s worth noting, however, that miners have a more modest impact on Bitcoin’s price than they used to. There are 19.6m Bitcoins circulating now — whereas in 2012 and 2016, when the first two halvings occurred, Bitcoin’s circulating supply stood at roughly 10m and 15.7m Bitcoins.

This means that the amount of Bitcoin that miners sell on the market is becoming a smaller and smaller percentage of Bitcoin’s circulating supply.

So while previous halvings have led Bitcoin’s price to new heights, there is no guarantee the upcoming halving will do the same.

Challenges for miners

Because Bitcoin miners tend to rely on Bitcoin rewards as their main source of income, halvings can, and often do, slash their revenue by half.

The problem for miners is that their operational costs remain the same. If a mining operation isn’t efficient enough — for example, it is locked in expensive electricity contracts with its energy providers — it can go under.

DL News, Thomas Carreras, 27 February 2024

Here is another take on what is going on.

In less than 8 weeks, the Bitcoin network will experience its fourth Halving, a crucial event that cuts the miner’s reward in half, thereby reducing the supply of new bitcoins by half. All eyes are on this date, estimated to be around April 15 next year by NiceHash, one of the major mining platforms.

Une horloge Bitcoin

NiceHash estimates the date of the Halving to be April 15, 2024

The fourth Bitcoin halving, a major event scheduled to occur every 210,000 blocks, will take place in less than 50 days, on April 15, 2024, according to estimations by NiceHash, one of the world’s major mining platforms. This halving will cut the BTC reward given to miners for each new validated block in half.

Indeed, since the launch of Bitcoin in 2009, this reward has gradually decreased from 50 BTC to 25 BTC in 2012, then to 12.5 BTC in 2016, and finally to 6.25 BTC during the last halving in 2020. Consequently, after April 15, 2024, it will drop to 3.125 BTC per block.

Historically, halvings have had a significant impact on the balance between supply and demand for Bitcoin. Indeed, by cutting in half the issuance of new bitcoins, each halving mechanically accentuates the scarcity of the leading crypto. Furthermore, with constant demand, this reduction in supply inevitably tends to drive up prices, as demonstrated by the previous halvings.

According to the Stock-to-Flow model, which analyses the impact of BTC scarcity, this halving of production could boost its price up to $450,000, with a symbolic threshold of $100,000 surpassed by September 2024. An optimistic prediction indeed, but one that underscores the crucial importance of this event for market dynamics.

A new era for Bitcoin?

The 2024 halving will undoubtedly have a major impact on the Bitcoin mining ecosystem. Indeed, with their income halved overnight, many miners could face serious profitability issues.

Only the most efficient and effective companies, equipped with the best hardware and benefiting from the lowest energy costs, should be able to overcome this challenge in a significantly more competitive environment, unless the price of BTC increases significantly.

According to a recent report by Fidelity Digital Assets, Bitcoin miners may incur significant losses if the price of BTC does not exceed $80,000 before the next halving.

Meanwhile, with the recent emergence of Bitcoin Spot ETFs, which facilitate access to the Bitcoin market for institutional investors, this fourth halving could well mark the beginning of a new era. Combined with the growing adoption of digital assets by large investors and the general public, it is certainly expected to have a notable impact on the dynamics of BTC’s price.

Cointribune, 26 February 2024

The combination of even tighter supply with demand boosted by the newly available ETFs could have an explosive impact on the price which fits in with the chart message.

Balckrock’s Bitcoin ETF is already experiencing high drama.

Bitcoin and BlackRock are both breaking new ground.

The top cryptocurrency climbed 10pc in the last 24 hours to top $57,000, a price not seen since the tail end of the previous bull market, in November 2021. The asset is up more than 30pc this year.

Bitcoin’s rise happened as BlackRock’s iShares Bitcoin Trust crossed $1bn in daily trading volume on Monday, driving the newly listed US exchange-traded fund to a fresh record.

The milestone places the fund 11th in terms of daily trading volume among all available ETFs, and within the top 25 stocks overall, according to Bloomberg Intelligence analyst Eric Balchunas.

“$1bn a day is big boy level volume, enough for (even big) institutional consideration,” Balchunas said. He described the figure as “insane,” especially for a product with so many competitors.

One of 10 recently approved spot Bitcoin spot ETFs in the US, BlackRock’s fund has led the pack in inflows since they were first greenlit on January 10. To date, BlackRock’s offering has pulled in $7.1bn.

On Monday, it also accounted for 41pc of total daily volume across the nine Bitcoin spot ETFs, excluding Grayscale. Together, these ETFs surpassed $2.4bn on the same day, Balchunas wrote in a separate post.

“IBIT went wild,” he wrote, referring to BlackRock’s fund by its ticker. He also said that Monday’s volume beat its previous record by about 30pc, or roughly $300m.

Analysts rip up old estimates after BlackRock leads $3bn in Bitcoin ETF inflows

Analysts rip up old estimates after BlackRock leads $3bn in Bitcoin ETF inflows

Spot Bitcoin exchange-traded funds are on course to beat annual estimates.

Bitcoin ETFs have brought renewed optimism for the world’s leading cryptocurrency as institutional and retail investors continue to pile in ahead of the asset’s upcoming halving event in April.

The halving is expected to slash miner rewards in half, significantly reducing the total daily supply of new Bitcoin hitting the market.

Analysts have previously pointed to that catalyst as one of several reasons boosting the attractiveness of global exchange-traded products.

ETF activity on Monday drove the total spot Bitcoin ETF volume across all products beyond $3.24bn.

A new record, according to Balchunas, who cited data from Bloomberg.

DL News, 27 February 2024

Strategy – Still Time to Buy the Usual Suspects

The Bitcoin-related investments I like (see yesterday’s alert) are Bitcoin itself, Ether, IBIT (the Blackrock Bitcoin ETF), Coinbase, which enables trading in cryptocurrencies and Microstrategy, which has become the world’s largest corporate holder of Bitcoins with 193,000 Bitcoins at the latest count.

Bitcoin is a very tight market with just 21m coins available for trading and many of those are in firm hands. For reasons I don’t fully grasp the halving event, due sometime in April, is expected to make supply even tighter.

Into this combustible mix has been introduced a powerful new source of demand in the form of Bitcoin ETFs. It looks like an explosive mix to me.

Share Recommendations

Bitcoin BTCUSD. Buy @ $60,295

Ether. EHUSD. Buy @ $3,342.50

iShares Bitcoin ETF. IBIT. Buy @ $32.5

Coinbase Global. COIN. Buy @ $210

Microstrategy MSTR. Buy @ $949

This is an intriguing chart because all of the trading since the shares were floated in 1998 could turn out to be a massive base pattern supporting a humungous rise. At the very least MSTR looks like an exciting speculation. Roughly speaking, on a spread bet, every 0.6-point bet, equivalent to buying 60 shares, is like buying 1 Bitcoin. At least that is how I look at it.

Further reading

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