Bitcoin’s recent halving event, which reduced the mining reward from 6.25 BTC to 3.125 BTC per block, could have a significant impact on the market dynamics, according to analysts at Bitfinex. They predict that the demand for Bitcoin could increase fivefold compared to its supply. The decrease in mining rewards will result in a significant reduction in the daily addition of new coins to the supply, estimated to be around $30 million. This is five times less than the average daily demand observed in U.S. spot ETFs.
Bitfinex analysts have reported a decrease in the daily issuance of Bitcoin following the halving event. The new supply of mined Bitcoin is now estimated to be valued between $40 and $50 million in USD-notional terms. However, this figure is expected to decline further to approximately $30 million per day as smaller mining operations are forced to cease due to economic pressures.
In contrast, the average daily net inflows from spot Bitcoin ETFs exceed the new supply of mined Bitcoin, standing at over $150 million, despite recent moderation and net negative flows.
Data from Glassnode indicates a tightening in supply since the halving. The total daily addition of new coins has fallen to around 450 BTC, a significant decline from the pre-halving four-year average of about 900 BTC. This marks the beginning of a supply squeeze in the Bitcoin market.
Before the halving, Bitcoin miners strategically sold their reserves in anticipation of the event. This, along with the introduction of spot ETFs in the United States, helped prevent a significant price decline. Miners also reduced their selling activity, possibly due to selling their BTC holdings or using them as collateral to upgrade their equipment and infrastructure.
Following a halving event, miners’ revenues typically diminish, leading to selling pressure as they try to maximize profits before their rewards are halved. However, Bitfinex believes that such negative market impacts are usually transient, as prices often rise and mining operations expand to compensate for the reduced rewards.
Since the halving, investors have shown a growing preference for taking direct custody of their coins, reducing the supply available in the market. Bitfinex has observed significant Bitcoin exchange outflows, suggesting that investors are storing their holdings in cold storage in anticipation of future price increases.
Despite active sales by long-term holders, there has not yet been the expected price decline before a halving. Analysts interpret this as a sign that new participants in the market are effectively absorbing the selling pressure.
At the time of reporting, the price of Bitcoin stands at $65,910, which is a rise of over 5% since the halving, contradicting the anticipated price correction.
