Bitcoin’s BTC/USD recent halving event could lead to a scenario where demand for the cryptocurrency surpasses its supply by up to five times, as per a fresh analysis by Bitfinex.
What Happened: Bitfinex’s analysts have suggested that the halving of Bitcoin’s mining rewards might lower the total value of new coins entering the market each day to around $30 million, CoinDesk reported on Tuesday. This is five times less than the daily average demand for U.S. spot ETFs.
“With the daily issuance rate declining post-halving, we estimate that the new supply added to the market (new BTC mined) would amount to approximately $40-$50 million in USD-notional terms based on issuance trends,” the Bitfinex analysts stated.
Post-halving, the total number of new coins added to the supply daily has dropped to 450 BTC (nearly $30 million) from the pre-halving four-year average of around 900 BTC, according to data from Glassnode.
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Bitfinex also observed that investors are increasingly opting to take direct custody of their coins, which further weakens the market’s supply side.
“Current on-chain data indicates that Bitcoin exchange outflows are reaching peaks not seen since January 2023, suggesting that many investors are moving their holdings to cold storage in anticipation of price increases” the analysts said.
At the time of reporting, Bitcoin was trading at $66,548.30, as per Benzinga Pro.
Why It Matters: The recent halving event, which saw the reward for mining a block drop from 6.25 BTC to 3.125 BTC, is a programmed process in the Bitcoin protocol designed to manage scarcity and regulate the inflationary supply of Bitcoin. This process effectively slows down the rate at which new Bitcoin is created.
Following the halving, Bitcoin transaction fees have significantly decreased, reaching a five-year low. This drop comes despite the launch of the Runes token standard, which initially caused a surge in transaction costs.
Furthermore, Cathie Wood's Ark Invest has suggested that Bitcoin could be primed for a rally of over 3,000% over the next 12 months, as the cryptocurrency becomes less inflationary than gold following the halving.
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