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Bitcoin halving will not bring 600% returns this year

Bitcoin Halving in 2024. A review by a Bitcoin mixer: mixer.money
Bitcoin halving will not bring 600% returns this year

  1. Bitcoin halving 2024
  2. ETF are changing business as usual
  3. Will we profit from bitcoin halving?

Bitcoin halving 2024

Lucas Kieley is Chief Investment Officer at Yield App, where he oversees the investment portfolio allocation and leads the expansion of diversified investment products. He was previously Chief Investment Officer at Diginex Asset Management and a Senior Trader and Managing Director at Credit Suisse in Hong Kong, where he managed QI and structured derivatives trading. He was also head of exotic derivatives at UBS in Australia. In Kieley’s opinion, we should not expect bitcoin halving to result in a record increase in its price.

Bitcoin price volatility over the past 30 days is around 4% – up from nearly 18% in April 2013. Bitcoin is starting to look more like a traditional stock.

ETFs are changing business as usual

We’re just a couple weeks away from the landmark event. Over the past three cycles, halving has been associated with a huge spike in volatility. Normally, a 30-40% drop in value is expected, followed by a meteoric rise to a new all-time high within, on average, 480 days from the date of the halving. This time, however, things have changed thanks to the advent of ETFs.

To understand where the bitcoin price will go next, you need to keep a close eye on the volatility of the asset. In recent months, there has been an expected decline as the pre-halving frenzy grew. However, these falls were minor by the standards of previous cycles. This time around, bitcoin’s correction has been much shallower, not exceeding 25%. Indeed, the most recent drop was only about 15% before BTC bounced back to the $70,000 mark.

The moderate price decline is a harbinger of a softer rally once halving is overcome. There is no doubt that bitcoin will face a normal decline after halving, and it will certainly hit a new record high after that. Equally, the returns will still look much more attractive than they would for traditional equity holders. But don’t expect prices to rise by more than 600%, which has happened since the last halving in 2020.

Two factors are at play. First, the percentage of long-term bitcoin holders has reached a record high of about 14 million BTC – more than 70% of the total 19,670,043 BTC circulating. In recent months, a record amount of BTC has been withdrawn from exchanges to cold wallets.

Процент от общего объема предложения биткоина долгосрочными держателями, 2009-2024 годы. Источник: Glassnode
Percentage of total bitcoin supply by long-term holders, 2009-2024. Source: Glassnode

But what has really led to a noticeable change in behavior is the emergence of the spot bitcoin ETF. Today, ETFs are harvesting more BTC from the market than miners can provide. On average, spot BTC ETFs have received about 10,000 BTC per day since launch, while miners generate only 900 new BTC each day. This exacerbates the shortage and drives up prices.

Importantly, however, it also means a dramatic decrease in long-term volatility because ETF investors are more long-term minded than the average crypto trader. While there has been a recent spike in volatility as the halving approaches, it remains well below levels during previous halving cuts. CoinGlass data shows that the 30-day historical volatility of BTC / USD has fallen from a high of nearly 18% in April 2013 to around 4%.

Цена биткоина (желтая) в сравнении с волатильностью биткоина (зеленая), апрель 2013-апрель 2024гг. Источник: CoinGlass
Bitcoin price (yellow) versus bitcoin volatility (green), April 2013-April 2024. Source: CoinGlass

This is because the investors who are now coming into the spot bitcoin ETFs are the same regular investors and institutions that have invested trillions in the S & P 500 ETFs. These are long-term holders for whom three years is the minimum investment period and their decisions to buy or sell investments are dictated by long-term factors such as macroeconomic conditions, structural changes in the market and the potential for long-term returns.

Will we profit from halving?

Bitcoin holders will have to think much more like a traditional equity investor than a crypto holder. They will have to keep a close eye on what long-term holders are doing because these are now at the helm.

Those wanting 600% returns will have to look for something else. Nevertheless, the trade-off will be more stable and reliable returns that don’t unduly distort the volatility profile of a typical balanced portfolio. And for most investors, this is a much more attractive prospect than an asset that has a 50/50 chance of soaring in value or disappearing completely.

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