According to experts at top cryptocurrency exchange Bybit, the scarcity of Bitcoin (BTC) increases following each halving. Soon, an upcoming event is predicted to occur within the next four days, making Bitcoin even more scarce than gold – effectively doubling its rarity in the market.
Before and after the Bitcoin halving, a report sheds light on what lies ahead for BTC. It indicates that after the event, there will be a decrease in the supply of Bitcoin due to a squeeze in its availability. This is because it’s projected that all centralized exchange reserves could be depleted within nine months following the halving.
Twice as Rare as Gold
According to Bybit, the Bitcoin stock-to-flow (S2F) model supports their argument since Bitcoin has become less plentiful than gold after each halving, as indicated by this metric. The S2F ratio is derived by dividing the current supply of a commodity by its annual production rate to establish a measure of scarcity.
Currently, as I pen this down, the S2F ratio for Bitcoin is approximately 56, whereas it’s around 60 for gold. Following the halving event, analysts predict that Bitcoin’s ratio will nearly double, reaching approximately 112.
Cutting the production of Bitcoin in half through halving helps decrease its availability for circulation, potentially leading to a tight supply situation. Early indications of a “squeeze” or price increase due to insufficient supply are already noticeable in Bitcoin markets. The situation may become more pronounced following the halving event.
The Bitcoin (BTC) available for use in spot Bitcoin exchange-traded funds (ETFs) typically originates from centralized exchanges, where investors sell their profitable positions or miners cash out their block rewards. However, when mining rewards decrease and investors choose to store their assets in cold storage or decentralized wallets instead of selling right away, the amount of Bitcoin being sold on the exchanges will diminish.
A Complex Cycle
Approximately two million Bitcoins are stored in central exchanges at present. With estimated daily inflows of $500 million for Bitcoin Spot ETFs, this equates to approximately 7,142 Bitcoins leaving exchange reserves each day. Consequently, these reserves would be depleted within nine months following the halving event.
Considering this factor, it’s no wonder that Bitcoin’s price might keep rising before and perhaps even after the halving event, given the expected supply compression driving the price to yet another peak. (Bybit’s statement paraphrased)
Despite the historical correlation between Bitcoin price increases following halvings, experts find this pattern intricate and are hesitant about the potential impact of the imminent event. Some argue that the upcoming post-halving rally may not be as impressive as previous markets’ reactions.
Despite this, market specialists are convinced that the increase in Bitcoin’s price following the halving event will be fueled primarily by heightened demand, with Bitcoin ETFs reaching their maximum capacity playing a significant role in this process.
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2024-04-17 11:12