With less than 10 days to go until the highly anticipated Bitcoin halving event, which typically signals a rapid price increase, analysts at CryptoQuant believe that the diminishing impact of supply reduction is gradually diminishing.
Despite historical data suggesting a rapid rise in Bitcoin prices, the analysts argue that the supply reduction brought about by the halving event may not have as significant an impact as most investors expect.
According to CryptoQuant’s analysis, the influence of the halving on the Bitcoin market is diminishing. They point out that between 2021 and 2023, there have been several instances where the demand from long-term holders exceeded the supply. However, the current supply-demand gap is larger than ever before, indicating that the market was already experiencing a shortage of supply before the halving. Therefore, even with a further decrease in supply after the halving, the upward pressure on Bitcoin prices may not be as significant as in the past.
Furthermore, the chart below shows that the monthly issuance of Bitcoin as a percentage of total available supply continues to decline, currently falling below 4%. This is significantly lower compared to the previous halvings, where the issuance accounted for 69%, 27%, and 10% of the total available supply before the first, second, and third halvings, respectively. This further demonstrates the strong demand for Bitcoin in the market, with investors continuing to buy or hold onto their Bitcoin.
CryptoQuant also reveals from their analysis that the demand from whale holders, who own between 1,000 and 10,000 Bitcoins, has reached an all-time high. Their holdings have increased by 11% compared to the previous month, and long-term holders are adding as much as 200,000 Bitcoins to their balances each month, which is approximately seven times the monthly issuance of Bitcoin (2.8 thousand Bitcoins).
In previous cycles, the surge in holdings from whales (indicated by the purple area in the chart below) has been a significant factor driving the increase in Bitcoin prices. Therefore, CryptoQuant believes that the growth in demand seems to be the main driver for price increases after the halving.
This emphasizes a key perspective that prices are determined by supply and demand. While the halving directly halves the supply, CryptoQuant places more importance on the growth in demand as the key driving factor for Bitcoin price increases.
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