Bitcoin (BTC) becomes more scarce after each halving, but the next event, taking place in the next four days, will make the digital asset twice as rare as gold, according to analysts at leading crypto exchange Bybit.
A report on what to expect before and after the Bitcoin halving found that BTC will experience a supply squeeze following the event as reserves on all centralized exchanges could be depleted within nine months.
Twice as rare as gold
Bybit said the Bitcoin stock-to-flow (S2F) model supports its claims as the metric has shown that BTC becomes more scarce than gold after each halving. The S2F ratio is calculated by dividing the circulating supply of a good by its annual production to derive a measure of scarcity.
At the time of writing, Bitcoin's S2F ratio is around 56, while gold's is at 60. After the halving, Bitcoin's ratio is expected to double to 112.
The halving slows supply by reducing the BTC production rate, and a supply shortage may be inevitable. Bitcoin is already seeing early signs of a short squeeze, which will only get worse after the halving.
BTC supply for spot Bitcoin exchange-traded funds (ETFs) typically comes from centralized exchanges as investors realize their profitable positions and miners sell their block rewards. If mining rewards are cut and investors store their assets in cold storage or decentralized wallets, miners would refrain from selling quickly and sell-side supply flowing into exchanges will decline.
A complex cycle
There are currently around two million Bitcoins in centralized foreign exchange reserves. Assuming that spot Bitcoin ETFs see daily inflows of $500 million, around 7,142 BTC will leave the forex reserves every day, suggesting that reserves will only last nine months after the halving.
“With this in mind, it is not surprising that the price of Bitcoin could continue to rise before the halving or even after, as the supply shortage pushes the price to another new record,” Bybit said.
Although halvings are known to trigger a rise in Bitcoin prices, analysts see this cycle as complex and remain uncertain about the impact of the upcoming event as BTC has already set a new high. Some believe that the recovery after the halving will be less remarkable than the market has experienced after past events.
Nonetheless, market experts believe that demand will drive BTC's post-halving surge this time as spot Bitcoin ETFs reach their full potential.
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