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Many directional traders are carefully considering how Bitcoin’s halving will affect market trends and rethinking their strategies in light of its historical bullish catalyst. The current market may create new issues from that perspective. One could say this Bitcoin cycle is unique. The largest digital asset rose dramatically this quarter and reached an all-time high before halving, which was unprecedented.
ETFs Overshadow Bitcoin Halving’s Supply Impact, Suggesting Stable Market
Market watchers see Bitcoin’s “halving” as a sign of future bull markets because it slows creation. The halving halves miners’ rewards for verifying transactions and creating blocks. Since miners must sell their rewards to cover mining costs, this artificial scarcity is expected to discourage Bitcoin sales. People say the scarcity effect kicks in when there are fewer bitcoins for sale.
Daily miners add 900 BTC to the market. The halving will reduce this to 450 BTC. In the past, this could have made Bitcoin scarcer and raised prices. However, ETFs are buying more Bitcoin than miners’ daily output, suggesting that the upcoming halving may not cause a supply squeeze.
Bitcoin market participants include LTHs and STHs. How long they’ll hold Bitcoin separates them. Glassnode defines LTHs as businesses that hold Bitcoin for more than 155 days. Bitcoins held for longer than this period are less likely to be sold during market fluctuations, indicating a stronger belief in their long-term value.
ATH Before Halving Alters Bitcoin Market Dynamics
In 2016, the market fell 30% from $760 to $540. About the time of the halving. This drop showed how market participants responded to the event rather than how it would affect supply. It showed how halving could cause market volatility immediately.
The 2020 halving complicated things. The “double whammy” of prices rising before the halving and issuance falling worsened miners’ problems, even though the immediate effects were less severe than the 2016 drop. Although there was no “sell-the-news” event this time, it demonstrated how the market responds to halving events.
It appears that ETFs’ buying power will exceed Bitcoin’s halving’s supply squeeze effect. Therefore, traders must weigh the effects of halving in the past against ETFs on Bitcoin’s price and availability today.
It is different if the ATH is reached before the halving, but the cycle’s progress follows past patterns if it matches the April 2021 ATH. ETFs’ ability to smooth out corrections suggests stability, but a drop in demand could make market changes even bigger, emphasizing the importance of trading carefully.