March 27, 2024
Anticipating Bitcoin's Post-Halving Scenario: ETF Demand Dip and Unrealized Gains Impact
Bitcoin ETF

Anticipating Bitcoin’s Post-Halving Scenario: ETF Demand Dip and Unrealized Gains Impact

As Bitcoin enthusiasts eagerly anticipate the upcoming halving event, which is expected to occur around April 19, 2024, analysts warn of potential bearish pressure looming over the cryptocurrency’s price.

Julio Moreno, the head of research at CryptoQuant, highlights two significant factors contributing to this outlook: a slowdown in inflows to spot Bitcoin ETFs and a high volume of unrealized gains from traders.

Unrealized Profits Drive Selling Pressure

According to Moreno, the recent rally in Bitcoin prices has led to a surge in unrealized profits among traders. This influx of profits exerts upward pressure on selling activity, potentially leading to downward pressure on Bitcoin prices shortly.

CryptoQuant’s net unrealized profit and loss (NUPL) indicator corroborates this analysis, signalling caution when it surpassed the 0.7 mark, indicating a predisposition among investors to cash out their profits.

On March 17, the NUPL indicator stood at 0.606, representing a 0.41% increase from the previous 24 hours, despite recent corrections in Bitcoin’s price.

NUPL indicator. Source: CryptoQuant

A slowdown in Bitcoin ETF Inflows

Bitcoin ETFs, which have been experiencing high demand, saw a significant slowdown in net inflows on March 14, with just $132 million in net activity.

This marks their lowest level in eight trading sessions and an 80% decline from previous days, raising concerns about a potential reduction in demand for Bitcoin through this investment avenue.

James Butterfill, head of Research at CoinShares, suggests that while a downward trend may be expected, it might not be as severe as previous bear markets.

Institutional investors typically engage in portfolio rebalancing strategies, which could temper volatility rather than exacerbate it. Butterfill points out that volatility in the current market is significantly lower than during the previous bull market in 2021, attributing this to the dampening effect of portfolio rebalancing.

Bitcoin ETFs Counteracting Miner Sales

Despite concerns about selling pressure from miners ahead of the halving event, Bitcoin ETFs have been in high demand. Cumulative net inflows into these products surpassed the $12 billion mark on March 15, indicating strong investor interest.

This influx of capital through Bitcoin ETFs is helping counteract the potential negative price effects of miners selling their reserves ahead of the halving.

As the halving event approaches, miners prepare for reduced rewards, with the block reward set to decrease from 6.25 BTC to 3.125 BTC per block. CoinShares anticipates that the average cost of production post-halving for crypto miners will be around $37,856.

Historically, miners have sold more of their BTC reserves before the halving to maximize profits, and data from CryptoQuant shows miner reserves at their lowest level in two years, with 1.81 million Bitcoin held by miners on March 15.

Miners cost production per Bitcoin post-halving. Source: CoinShares.

Conclusion

As Bitcoin approaches its halving event, the market faces a confluence of factors that could influence its price trajectory.

While a slowdown in ETF inflows and a high volume of unrealized profits may exert downward pressure, institutional portfolio rebalancing and continued demand through Bitcoin ETFs could help mitigate volatility.

Miners, meanwhile, are bracing for reduced rewards but remain active participants in the market as they navigate the evolving landscape of Bitcoin mining.

Investors and enthusiasts are closely monitoring these developments as they anticipate the impact on Bitcoin’s price in the coming weeks.

Image: Wallpapers.com

Related posts

U.S. Bitcoin ETF Outflows Continue: $261.5M Leaves Market

Cheryl  Lee

Grayscale CEO Foresees Fee Reductions for Bitcoin ETF Amid $12 Billion Outflows

Kevin Wilson

ETFs Hoover Up Bitcoin: Demand Surpasses Miner Production by 10-Fold

Harper Hall

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Read More

Index