Bitcoin price is trading above $60,000, putting it within striking distance of a new all-time high. This would be an unprecedented move for the top cryptocurrency by market cap, which historically has only set a new price record after each halving.
Could BTC set a new record in more ways than one: by hitting a new record before the halving for the first time ever? Let’s take a look at the data.
Why the Bitcoin halving is important
The Bitcoin halving is one of the most anticipated and impactful events for the cryptocurrency. It reduces the supply of new coins coming into circulation. The halving halves the reward miners receive for processing blocks. This means that less new BTC is created over time, making the supply scarcer.
Reduced supply combined with stable or increasing demand can lead to higher prices according to economic principles. Many investors see halvings as a potential catalyst for bull runs. This time, however, there are unique factors that influence supply and demand.
Unprecedented Price Action in Crypto
Unlike previous Crypto market cycles, which are suspected to be driven primarily by the supply and demand dynamics created after the halving, the Bitcoin price is in an unusual spot: just below all-time highs.
In all previous market cycles, BTCUSD had more than 100% or more to gain with each halving before hitting a new all-time high. In fact, it took between two and seven months after the halving for new all-time highs to be reached. But this time, Bitcoin It’s about 10% away from hitting a new all-time high before the halving ever comes.
What is behind the change in dynamics?
What has changed in 2024 that was not a factor in the past, as market cycles are driven by global liquidity and supply versus demand? First, China has started injecting liquidity into the global economy in an attempt to save its financial markets.
Even more important is the impact of the new spot BTC ETFs, which are starting to pick up in terms of demand and net inflows. Each ETF provider must purchase a corresponding amount of Bitcoin based on the demand for ETF shares. This week, ETFs bought a total of 9,163 BTC in one day. On the same day, BTC miners only produced about 900 BTC. This suggests that ETFs are currently exceeding Bitcoin’s new supply ten times a day.
Are institutions leading the way in halving?
If ETFs currently absorb ten times the new supply of BTC, this will be twenty times the amount of new BTC mined if there is no change in demand over the next two months. When the halving takes place in April, the BTC block reward that miners receive will be halved.
Understanding that supply will soon decline further and how high the demand for ETFs is, a simple math suggests that demand is aggressively outpacing available supply. The only other way to buy new coins is to sell the holders. And due to the belief of Bitcoin holders who often hold their Bitcoin for years, the only solution to get them to sell is to raise prices.
Strength confirmed in the Crypto market
The early increase in buying pressure can be seen in Bitcoin’s monthly Relative Strength Index chart. In all previous cases, BTCUSD reached above 70 on the RSI, either during the halving or in the months following. Only in 2024 will we see the monthly RSI rise above this important bullish level.
Interestingly, a reading above 70 on the RSI suggests that Bitcoin is overbought. However, as history shows, BTCUSD remains significantly overbought for months during the most powerful phases of any bull run. With BTC above 70 on the monthly RSI, and incredible demand and falling supply, there’s no telling what could happen for the rest of the year.
Boost returns with PrimeXBT trading tools
With a rise above 70 on the RSI, the Bitcoin price has risen by 40% in one month. Although this is not a paltry return, by using PrimeXBT Crypto Futures up to an adjustable leverage of 200:1, the same 40% return could have yielded an 8,000% return on investment.
The award-winning trading platform also includes all the risk management and charting tools needed to protect your capital and make the most of the bull run before it ends. PrimeXBT’s competitively low trading costs, with maker and taker fees as low as 0.01% and 0.02%, give traders more room to maximize profits from market movements.
Disclaimer: The article is for educational purposes only. It does not represent NewsBTC’s views on buying, selling or holding investments and of course investing involves risks. You are advised to conduct your own research before making any investment decisions. Use the information on this website entirely at your own risk.