Macro Factors to Shape Bitcoin Prices: Coinbase’s Insights Post-Halving

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All eyes are on the upcom­ing Bit­coin halv­ing sched­uled for mid-April 2024, which will reduce the rewards grant­ed to min­ers for val­i­dat­ing trans­ac­tions by half. This will mark the fourth occur­rence of a halv­ing event in Bitcoin’s history.

Although the mar­ket is cur­rent­ly expe­ri­enc­ing a down­turn, Bit­coin has seen sig­nif­i­cant growth of more than 150% since mid-Octo­ber last year. Accord­ing to the lat­est “hand­book” by Coin­base, this strong per­for­mance will con­tin­ue up to and after the upcom­ing halving.

Coinbase Warns of Limited Historical Evidence

Even though there’s a chance the halv­ing could pos­i­tive­ly influ­ence Bitcoin’s per­for­mance, Coin­base point­ed out that the his­tor­i­cal evi­dence sup­port­ing this con­nec­tion is lim­it­ed, mak­ing it some­what spec­u­la­tive. Addi­tion­al­ly, Bitcoin’s price is influ­enced by fac­tors beyond cryp­to-spe­cif­ic events like halv­ings, indi­cat­ing that it doesn’t oper­ate in isolation.

It is evi­dent that a sig­nif­i­cant por­tion of Bitcoin’s recent surge was pro­pelled more by opti­mism regard­ing spot Bit­coin ETFs rather than excite­ment sur­round­ing the halv­ing. Look­ing for­ward, Coin­base said that there are sev­er­al macro­eco­nom­ic fac­tors that are poised to influ­ence Bit­coin prices significantly.

Coin­base antic­i­pates the US Fed­er­al Reserve to start rate cuts as ear­ly as May and ini­ti­ate a reduc­tion in its quan­ti­ta­tive tight­en­ing pro­gram short­ly thereafter.

The hand­book also drew atten­tion to the pos­si­bil­i­ty of height­ened sell­ing pres­sure from min­ers, who may sell a larg­er por­tion of their rewards, as well as from com­pa­nies emerg­ing from bank­rupt­cy, such as for­mer cryp­to lenders Cel­sius Net­work and Gen­e­sis Global.

Bitcoin’s On-Chain Analytics

Upon assess­ing on-chain ana­lyt­ics, Coin­base observed that the cur­rent cycle close­ly mir­rors the peri­od from 2018 to 2022, dur­ing which the lead­ing cryp­to asset saw a 500% increase from its low­est point.

Its hand­book also shared an inter­est­ing obser­va­tion about the total sup­ply of Bit­coin held by long-term investors – indi­vid­u­als who retain their cryp­to hold­ings for a min­i­mum of 155 days. His­tor­i­cal­ly, this time­frame indi­cates a notable decline in the like­li­hood of these assets being sold off.

Assum­ing all oth­er fac­tors remain con­stant, Coin­base said that the long-term hold­ers are expect­ed to be less inclined than short-term hold­ers to see halv­ings as a chance to cap­i­tal­ize on mar­ket strength by selling.

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