Bitcoin’s upcoming halving event has garnered significant attention in the crypto community and media. In previous halving cycles, there was a pattern of high volatility, with a sell-off followed by a sharp rise to a new all-time high. However, this time is different due to the introduction of the spot Bitcoin ETF.
To predict Bitcoin’s price movement, it’s essential to analyze its volatility. While there have been some expected drawdowns leading up to the halving, they have been relatively mild compared to previous cycles, not exceeding 25%. The most recent drawdown was just around 15%, and Bitcoin quickly rebounded towards the $70,000 mark.
This less pronounced sell-off indicates that the rally after the halving will be less intense. While Bitcoin will likely experience a customary sell-off followed by a new all-time high, the price increases will not be as significant as the 600% surge seen in the last halving in 2020.
Two factors contribute to this change in behavior. Firstly, the percentage of long-term Bitcoin holders has reached a record high, with around 14 million BTC, equivalent to over 70% of the total circulating supply. These holders have adopted a long-term approach, withdrawing their BTC from exchanges to cold wallets.
Secondly, the introduction of the spot Bitcoin ETF has further influenced the market. These ETFs are acquiring more BTC supply than miners can generate, causing scarcity and driving prices upward. ETF investors have a long-term perspective, which has led to a decrease in long-term volatility. Despite recent volatility leading up to the halving, it remains lower than in previous cycles.
Investors looking to profit from the halving will need to adopt a more traditional equity investor mindset. They should monitor the assets under management of spot Bitcoin ETFs and follow the decisions of long-term holders. Expecting returns of 600% is unrealistic this time, but investors can anticipate steadier and more reliable returns that align with a balanced portfolio.
Overall, the introduction of the spot Bitcoin ETF and the increase in long-term holders have resulted in a different market environment for the halving. Investors must adjust their strategies accordingly and prioritize long-term factors rather than short-term volatility.