The fourth halving of Bitcoin is mere days away – and investors are circling the coin with enthusiasm, particularly as its price has dipped over the past week following the escalation of Middle East tensions. Some are seeing it as the perfect opportunity to buy low, as previous halvings preceded record-setting bull runs, and it’s possible that the same will be true again.
The lessons of the past week are important, however, as external factors should be considered. That’s the message of Goldman Sachs, who cautioned investors against counting on the next halving to bring in the bulls.
“Historically, the previous three halvings have been accompanied by BTC price appreciation after the halving, although the time it took to reach the all-time highs differs significantly. Caution should be taken against extrapolating the past cycles and the impact of halving, given the respective prevailing macro conditions,” wrote the Fixed Income, Currencies and Commodities and Equities team at Goldman Sachs in an April 12 note to their clients.
The macro conditions in question refer to the ones that previously created a risk-friendly environment during Bitcoin’s earlier booms. The global situation has changed dramatically over the past decade, however, with high interest rates and inflation both currently enjoying their time in the sun. As a result, investors are much less interested in taking on new risks than they were following the previous halvings.
With that said, Bitcoin is not exactly a new risk at this point – which brings us to Goldman Sach’s other observation, being that enthusiasm around spot Bitcoin ETFs could be enough to drive up the coin’s value to new heights despite the generally cool investor climate.
It’s not all about the halving
Since launching back in January, the 11 spot Bitcoin ETFs have accumulated $59.2 billion in investments and dominated the trading cycles for ETFs across the board. In the case of BlackRock, its spot Bitcoin ETF set the record for the fastest accumulation of $10 billion in an ETF, demonstrating just how much interest there is in the investment vehicle.
“…BTC price performance will likely continue to be driven by the said supply-demand dynamic and continued demand for BTC ETFs, which combined with the self-reflexive nature of crypto markets is the primary determinant for spot price action,” Goldman’s team wrote.
In other words, the upcoming Bitcoin halving isn’t necessarily what’s going to keep the momentum going for the coin – at least not when compared to the potential behind the investments in the ETF stream. The investors in the ETF market represent $100 trillion in assets around the world, and they’re essentially just getting started with transferring their investments into the cryptocurrency market.
If even a few of those investors follow Ark Invest’s recommendation to allocate 19.4% into Bitcoin, then we’ll be seeing a massive influx of cash into the cryptocurrency market over the coming few years.
Based on how much Bitcoin has been spurred upward since the launch of the spot ETFs – netting more than a 50% increase in value – the impact of the ETFs should not be underestimated. At the same time, the halving will play a role in decreasing supply and driving up demand, setting the stage once again for the coin to rise even if fewer new investors are attracted to it.
For already-established crypto investors, it’s an ideal situation made even sweeter by the circumstantial dip in Bitcoin’s value on the eve of Saturday’s halving.
