All eyes are on the upcoming Bitcoin halving, scheduled for mid-April 2024, which will reduce the rewards given to miners for validating transactions by half. This will be the fourth occurrence of a halving 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 Coinbase’s latest “playbook,” this strong performance will continue until and after the upcoming halving.
Coinbase warns of limited historical evidence
While there is a possibility that the halving could have a positive impact on Bitcoin's performance, Coinbase noted that the historical evidence for this connection is limited, making it more speculative. Additionally, Bitcoin's price is influenced by factors beyond crypto-specific events such as halvings, suggesting that it does not operate in isolation.
It is evident that a significant portion of Bitcoin's recent surge is due to optimism surrounding spot Bitcoin ETFs rather than halving excitement. Looking ahead, Coinbase said there are several macroeconomic factors that could significantly impact Bitcoin prices.
Coinbase expects the Federal Reserve to begin cutting interest rates as early as May and begin tapering its quantitative tightening program shortly thereafter.
The guide also drew attention to the possibility of increased selling pressure from miners who may sell a larger portion of their rewards, as well as companies emerging from bankruptcy such as former crypto lenders Celsius Network and Genesis Global.
On-chain analysis of Bitcoin
Evaluating on-chain analysis, Coinbase found that the current cycle largely corresponds to the period from 2018 to 2022, during which the leading crypto asset saw a 500% increase from its low point.
The guide also included an interesting observation about the total supply of Bitcoin held by long-term investors – people who hold on to their crypto holdings for at least 155 days. Historically, this time frame suggests a significant decline in the likelihood of these assets being sold.
Assuming all other factors remain constant, Coinbase said long-term holders are expected to be less inclined than short-term holders to view halvings as an opportunity to capitalize on market strength by selling.
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