Bitcoin traders have enjoyed the first quarter of 2024 with the largest cryptocurrency by market capitalization buoyed by the SEC approval of a raft of spot Bitcoin ETFs in early January. Bitcoin hit a fresh all-time high in March and volatility returned, boosting trading volumes and liquidity.

Bitcoin Demand vs. Supply

With the demand for Bitcoin increasing sharply, via heavy purchases by the eleven different spot ETF providers, the upcoming reduction in new BTC supply - the Halving expected in mid-April – could provide another positive dynamic. Continued demand and reduced supply will likely see the price of Bitcoin move higher still, albeit with periods of sharp price swings and heightened volatility.

What is the Bitcoin ‘Halving’?

Bitcoin Halving is a recurring event hardwired into Bitcoin's code that reduces the reward for mining new blocks by half every 4 years. This systematic reduction in the supply of new bitcoins entering circulation aims to increase scarcity over time. With Bitcoin's maximum supply capped at 21 million coins, Halving helps regulate supply. Historically, as these supply shocks hit the market, the reduced issuance of new coins coupled with constant or rising demand has exerted upward price pressure on Bitcoin. Halvings are therefore viewed as bullish events by market participants who anticipate price appreciation in their wake as the asset becomes incrementally scarcer over time.

Past Halvings occurred in 2012 (reducing block rewards from 50 to 25 BTC), 2016 (25 to 12.5 BTC), and 2020 (12.5 to 6.25 BTC). The next Halving is expected around mid-April 2024 and will see block rewards drop from 6.25 to 3.125 BTC.

Historical Bitcoin Halving Price Action

November 28th, 2012

Halving Price - $13 --- 2013 Peak Price - $1,125

July 16th, 2016

Halving Price - $664 --- 2017 Peak Price - $19,798

May 11th, 2020

Halving Price - $9,168 --- 2021 Peak Price - $69,000

Ethereum Spot ETFs – Sitting on the SEC’s Desk

While the Bitcoin spot ETF provided a wide range of investors an opportunity to own the asset, it also gave the SEC and ETF providers with a rough template for a range of new cryptocurrency ETFS. As we write, there are eight Ethereum ETF applications sitting with the SEC, with one by VanEck expected to hear on May 23rd if it has been finally approved or not. It may well be that these Ethereum ETFs are not even fully decided upon this year, or if they will cause the same demand shock that the Bitcoin ETFs produced, but they need to be followed in the months ahead.

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