A recent research report from CryptoQuant suggests that the Bitcoin halving will have a smaller impact on the price of Bitcoin than many investors expect. The report argues that the effect of the halving has been diminishing, as the new issuance of Bitcoin is decreasing relative to the amount of Bitcoin being sold by long-term holders. Instead, the key driver influencing the price of Bitcoin after the halving will be the increase in demand from investors with significant holdings of Bitcoin.
According to CryptoQuant, demand from whales holding between 1,000 and 10,000 Bitcoin is currently at its highest ever, with a 11% month-on-month growth. The total number of wallet addresses holding 1,000-10,000 Bitcoin is also significantly increasing. While the Bitcoin halving typically reduces supply and puts upward pressure on the price of Bitcoin, there have been instances where the monthly demand from long-term holders has exceeded the supply. However, the current gap between supply and demand is much larger than before, suggesting that the halving’s effect on the price may not be as powerful this time.
Long-term holders are now accumulating about seven times more Bitcoin per month than the new Bitcoin entering circulation. The research report states that permanent holders are adding around 200,000 Bitcoin per month to their balances, while the monthly issuance of Bitcoin will decrease to around 14,000 after the halving. Furthermore, the total issuance of Bitcoin now represents only 4% of the total available supply, compared to 69%, 27%, and 10% before the previous halvings.
Historically, the price of Bitcoin has experienced significant increases after halving events. After the 2016 halving, the price increased by about 4,200% to $19,800, and after the 2020 halving, it increased by almost 683% to $69,000. The upcoming halving will reduce block rewards from 6.25 Bitcoin to 3.125 Bitcoin.
Despite the research suggesting that the halving may have a smaller impact on the price of Bitcoin this time, other indicators, such as open interest in Bitcoin futures and investor optimism, suggest that the halving could still be a catalyst for a higher price. Open interest in Bitcoin is currently at $78.36 billion, significantly higher than the volume recorded before the previous halving. Pseudonymous trader Rekt Capital also believes that any price dip in Bitcoin before the halving is likely to bounce back quickly.