Grayscale, a crypto fund, suggests that this year’s Bitcoin (BTC) halving may not follow the same pattern as previous cycles due to the introduction of Bitcoin ETFs, Ordinals, and a resurgence in developer activity.
While the upcoming Bitcoin halving typically signals a bullish trend, Grayscale points out that various external factors could alter its impact. For instance, Grayscale recently converted its Grayscale Bitcoin Trust (GBTC) into the world’s largest Bitcoin ETF, potentially mimicking the effects of a second halving within the same year.
Explaining this concept in a blog post, Grayscale elaborated that assuming daily net inflows of $10 million into ETF products, when divided by the daily issuance of Bitcoin ($19 million), the resulting 50% is akin to the effects of another halving. Since the launch of Bitcoin ETFs last month, they have accumulated a total of $2.6 billion in inflows.
Traditionally, the halving event occurs approximately every four years, reducing the number of newly issued coins within each Bitcoin block by half. However, Grayscale suggests that past rallies following halving events may not solely be attributed to declining supply inflation but may also coincide with significant macroeconomic events, such as the financial stimulus measures implemented in response to the COVID-19 pandemic in 2020.
While uncertainty looms over macroeconomic conditions, the market is currently pricing in a 50% likelihood of the Federal Reserve initiating interest rate cuts in May.
Additionally, halving events often lead to a shakeout among less efficient players in the mining industry, who may struggle to operate profitably with reduced block rewards. Grayscale notes that this year, Bitcoin miners face added pressure due to rising network hashrate and declining block subsidies.
However, there are positive developments on the horizon. Bitcoin miners stand to benefit from Ordinals, which have boosted network activity, transaction fees, and miner revenue independently of the halving schedule. Furthermore, Ordinals have spurred innovations in Bitcoin, addressing scalability concerns and enabling the creation of decentralized applications (dApps) that expand Bitcoin’s ecosystem.
In conclusion, Grayscale believes that the confluence of Bitcoin ETFs, Ordinals, and a vibrant developer community may reshape the impact of this year’s halving cycle, potentially diverging from previous patterns.