The Impact of Bitcoin’s Market Structure on Post-Halving Prices: Insights from Grayscale

Fundamental Changes in Bitcoin Demand-Supply Equation and the Impact on Cryptocurrency Prices

According to an analysis by asset manager Grayscale, the upcoming halving event is likely to have a greater effect on cryptocurrency prices due to fundamental changes in Bitcoin’s demand-supply equation.

Historically, halving events have been followed by periods of price appreciation. However, the addition of a new factor, exchange-traded funds (ETFs), will also play a role in Bitcoin’s performance after the April halving.

“In addition to positive onchain fundamentals, the market structure of Bitcoin appears to be favorable for post-halving prices,” states the report.

The analysis by Grayscale highlights that the current mining rate of 6.25 Bitcoin per block translates to an annual value of approximately $14 billion, assuming a price of $43,000. This means that in order to maintain current prices, there needs to be a buy pressure of $14 billion over the same period.

The Impact of Bitcoin Miners on the Crypto Market and the Potential Role of Bitcoin ETFs

The current selling pressure in the crypto market can be attributed to Bitcoin miners. Every four years, Bitcoin undergoes a “halving” event that reduces the reward for mining a block by 50%. This results in a slower rate of new coins being introduced into the network.

For miners, this deflationary mechanism means a significant decrease in mining revenue. However, their costs remain the same or may even increase in order to stay profitable. As a result, miners often sell more of their Bitcoin holdings, leading to an increase in supply and a decrease in prices.

According to Grayscale, the recent launch of nine Bitcoin ETFs on Wall Street could potentially counterbalance the sell pressure from miners. These ETFs could create a new and steady demand for Bitcoin, which would have a positive impact on its price.

The introduction of Bitcoin ETFs has already seen a positive response from investors. In just 20 trading sessions since their launch on February 9th, these products have reached a milestone of $10 billion in assets under management (AUM). The iShares Bitcoin Trust from BlackRock is currently leading the way with BTC holdings worth $4 billion, as reported by BitMEX Research.