CryptoQuant: Demand now the primary driver as Bitcoin halving loses price influence

According to a research report from crypto analytics firm CryptoQuant, the supply shock caused by the Bitcoin halving will not have as significant an impact on the price of Bitcoin as many investors expect. The report argues that the effect of the halving has been diminishing as the issuance of new Bitcoin decreases relative to the amount being sold by long-term holders. Instead, the key driver of Bitcoin’s price after the halving will be the increase in demand from investors with substantial holdings of Bitcoin. The report notes that demand from whales holding between 1,000 and 10,000 Bitcoin has reached its highest ever, with 11% month-on-month growth. The total number of wallet addresses holding 1,000-10,000 Bitcoin is also increasing significantly. While the halving typically reduces supply and pushes up the price of Bitcoin, there have been instances where the monthly demand from long-term holders has exceeded the supply. However, the current gap between them is larger than ever, suggesting that the halving’s effect on Bitcoin’s price may not be as powerful as in the past. Long-term holders are now accumulating about seven times more Bitcoin per month than what is entering circulation. The report also highlights that the total issuance of Bitcoin has dropped to only 4% of the total available supply, a much smaller proportion compared to previous halvings. After the 2016 halving, Bitcoin’s price increased by about 4,200% to $19,800, and after the 2020 halving, it increased by almost 683% to $69,000. The upcoming halving will reduce block rewards from 6.25 Bitcoin to 3.125 Bitcoin. Despite these findings, other indicators suggest that investors remain optimistic about the halving’s potential to boost Bitcoin’s price. Open interest in Bitcoin is currently at $78.36 billion, 30 times higher than the volume recorded 11 days before the previous halving in May 2020. This suggests heightened market activity and trader sentiment. Pseudonymous trader Rekt Capital also expressed optimism, stating that any price dip in Bitcoin before the halving is likely to bounce back quickly.