Halving Impact and Macro Shifts Create Tailwinds for Bitcoin

Based on our analysis, March’s record-breaking Bitcoin price surge above $70,000 might have been a “misleading signal” or “deceptive move” caused by the introduction of new spot Bitcoin Exchange Traded Funds (ETFs). Nevertheless, taking into account the upcoming halving event and persistent supply and demand dynamics, we are optimistic about Bitcoin and cryptocurrencies’ prospects for the remainder of the year.

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Some analysts question whether Bitcoin has reached its peak following its unprecedented surge to a new high of $73,750 on March 14, with a market capitalization of $1.44 trillion, just weeks before the scheduled halving. The frenzied uptrend from the beginning of the year, when Bitcoin’s price was as low as $39,000, alarmed both speculative investors and those who had been counting on the “halving trade,” resulting in a mass selloff.

Despite the recent retreat in Bitcoin’s price, it may have been triggered by broader economic factors. chief among them were hawkish remarks from the Federal Reserve, casting doubt on the likelihood of an interest rate cut in 2024 and increasing the prospect of a rate hike instead. Consequently, investors adopted a risk-averse stance, causing Bitcoin’s price to slide. However, more recent economic data has fallen short of expectations, making a rate hike increasingly unlikely for now. This change in outlook has revived the “risk trade,” providing a floor for Bitcoin’s price and allowing it to recover above $60,000 once again. The renewed focus on supply and demand dynamics could bode well for higher Bitcoin prices moving forward.

There are several reasons to be bullish on Bitcoin and crypto.

Previously, each of the last three bitcoin halvings has been followed by new record-high prices for the cryptocurrency within a few months. We anticipate that this pattern will intensify as more institutional investors integrate bitcoin into their investment portfolios, resulting in reduced supply. This upward trend in bitcoin’s value is expected to boost the prices of all related cryptocurrencies.

Two significant events transpired in the Bitcoin market. Firstly, the arrival of spot Bitcoin ETFs in early 2024 marked a turning point. These ETFs enable investors to buy shares via their regular brokerage accounts. The convenience extends further as financial advisors are expected to offer these investments soon. Companies like Merrill Lynch, Morgan Stanley, and LPL are currently assessing their platforms for availability. With approval imminent on these platforms, Bitcoin investment becomes more accessible and the process simpler. This ease of access is likely to fuel increased demand for Bitcoin.

As a researcher studying Bitcoin and the global crypto markets, I’d like to emphasize that regulatory developments play a pivotal role in shaping Bitcoin’s price dynamics. The potential passage of a U.S. bill creating a clear regulatory framework for cryptocurrencies and Europe‘s MiCA regulation are two significant events to watch out for. These regulations will help dispel the notion that Bitcoin and crypto are just novelty items or “pet rocks.” Instead, they will recognize their value as digital assets with technological utility. This shift in perception could elevate Bitcoin and crypto from mere speculative investments to strategic ones and even make them attractive flight-to-quality investments.

As a researcher studying Bitcoin and the cryptocurrency market, I recognize that various factors, including market forces, investor attitudes, technological innovations, and macroeconomic trends, significantly impact Bitcoin’s price. I am optimistic about Bitcoin’s future and plan to closely monitor the post-halving market developments.

Note: The views expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates.