As the Bitcoin (BTC) halving approaches, Glassnode researchers advise traders to adjust their strategies and expectations. The company's latest report highlights the importance of monitoring the behavior of long-term holders and the inflation rate of the long-term holder market to anticipate market changes.
This cycle is different from the previous ones as Bitcoin hits an all-time high before the halving. The introduction of ETFs has brought stability to the market, but a decline in ETF demand could increase volatility.
After the halving, the daily issuance of new BTC will drop from 900 to 450. While this reduction typically drives prices higher, current market dynamics, particularly ETF acquisitions, are changing expectations. ETFs remove more Bitcoin from circulation than miners, reducing the impact of the halving on the overall supply.
Glassnode notes that the purchasing power of ETFs could overshadow the traditional “halving effect” on price and future market movements. As the halving approaches, traders are encouraged to think about new questions and adjust their strategies accordingly.
What sets this cycle apart
The current Bitcoin cycle has deviated from historical patterns, with BTC surpassing its previous all-time high (ATH) well before the upcoming halving. Traditionally, new market cycles began 12 to 18 months after the previous bull market peak, and new highs were reached several months after the halving. This has led to the belief that halving events trigger bull runs due to supply constraints.
However, the introduction of institutional demand for Bitcoin ETFs is likely to mitigate the impact of the halving this cycle. The capital inflow from these ETFs likely helped BTC break its previous ATH before the halving.
Some speculate that the current cycle may be shorter than previous ones, but it is difficult to determine this with certainty. Analyzing data can help assess the current phase of the market cycle and the likelihood of a sustained uptrend.
Breaking the ATH before the halving does not necessarily represent a departure from historical norms for Bitcoin. The key is to identify the true peak of the previous bull market. Glassnode claims that this happened in April 2021, even though Bitcoin reached a higher price in November 2021. This assumption is based on the fact that after the April high, most technical and on-chain indicators related to market sentiment and investor behavior showed typical bear market values and never fully recovered.
Considering April 2021 as the previous bull market high, the current cycle is well in line with historical norms. This suggests that the bull market could continue for a longer period despite breaking the previous high before the halving.
When evaluating the differences between the current cycle and historical trends to optimize trading strategies, monitoring the Bull Market Correction Drawdowns metric can be helpful. This indicator reflects the depth and frequency of price declines during the ongoing bull market.
Interestingly, this cycle has seen less severe corrections compared to the significant 30-40% declines seen in previous bull markets. Tracking these drawdowns provides traders with insights into market sentiment, risk appetite, and potential turning points. As ETF inflows continue to shape the market, a significant shift towards milder corrections could indicate changing investor behavior and serve as a timely signal to adjust strategies.
The influence of newly mined Bitcoins becomes less important compared to the growing demand for ETFs. The recent market corrections were largely influenced by negative flows into spot Bitcoin funds.
With Bitcoin trading sideways between $63,000 and $65,000, traders are urged to closely monitor market dynamics and adjust their strategies to navigate the evolving landscape surrounding the upcoming halving event.
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