According to a new research report from CryptoQuant, the upcoming Bitcoin halving will not have as much impact on the price of Bitcoin as many investors expect. The report argues that the effect of the halving has been diminishing, as the new issuance of Bitcoin decreases relative to the selling of long-term holders. Instead, the key driver affecting the price of Bitcoin this time will be the increase in demand from investors with sizeable holdings of Bitcoin.
CryptoQuant notes that demand from whales holding between 1,000 and 10,000 Bitcoin has reached its highest ever, with 11% growth month-on-month. Additionally, the total number of wallet addresses holding 1,000-10,000 Bitcoin is significantly increasing.
While the Bitcoin halving typically puts upward pressure on the price of Bitcoin by reducing supply, there have been instances between 2021 and 2023 where the monthly demand from long-term holders has exceeded the supply within the same timeframe. However, the current gap between them is much larger than ever, suggesting that the halving’s effect on Bitcoin price action might not be as powerful as it has been in the past.
Long-term holders are now accumulating about seven times more Bitcoin per month than new Bitcoin entering circulation. The report states that permanent holders are adding as much as 200K Bitcoin per month to their balances, much more than the ~28K Bitcoin issuance. After the halving, Bitcoin monthly issuance will decrease to ~14K.
Furthermore, the total issuance of Bitcoin has dropped to only 4% of the total available supply, a significantly smaller proportion compared to previous halvings.
After the 2016 halving, the price of Bitcoin increased by about 4,200% to $19,800, and after the 2020 halving, the price of Bitcoin increased by almost 683% to $69,000.
The upcoming halving, scheduled for April 20, will reduce block rewards from 6.25 Bitcoin to 3.125 Bitcoin.
Despite the research indicating that the halving may not have as significant an impact on the price of Bitcoin, other indicators suggest that investors remain optimistic. Open interest in Bitcoin is currently at $78.36 billion, which is roughly 30 times higher than the volume recorded 11 days before the previous halving in May 2020.
Pseudonymous trader Rekt Capital believes that any price dip in Bitcoin before the halving is likely to bounce back quickly, declaring it as the last bargain-buying opportunity in the pre-halving period.