According to Charles Edwards, the analyst and founder of Capriole Investments, several indicators derived from the Bitcoin and cryptocurrency blockchains point towards a continued growth in this bull market.
In his most recent update, Edwards shared that the fees generated from the recent Runes release and indicators following Bitcoin’s halving event imply a potential increase in the base price level for Bitcoin (BTC).
“Bitcoin now harder than gold”
The fourth reduction in Bitcoin’s supply increase, or “halving,” caused a decrease of around 50% in the production of new Bitcoins. As a result, Bitcoin’s inflation rate is now lower than that of gold.
Edwards argued that due to extended phases of currency devaluation and elevated inflation, Bitcoin emerges as a leading option among versatile assets for safeguarding long-term wealth.
“Gold’s inflation rate went up +50% in 2023 to 3% p.a. That makes Bitcoin’s inflation rate less than one-quarter of gold’s. Bitcoin is now the hardest store of value.”
According to market analysis company Glassnode, the Bitcoin halving led to Bitcoin having less new coins issued than gold, making Bitcoin more scarce than gold.
Glassnode analysts said:
“The fourth halving also marks a significant milestone in the comparison of Bitcoin to Gold as for the first time in history, Bitcoin’s steady-state issuance rate (0.83%) becomes lower than gold (~2.3%), marking a historic handover in the title of scarcest asset.”
In the interim, Arthur Hayes, a businessman from the United States with a past role as CEO of BitMEX cryptocurrency exchange, stated that various governments worldwide will persist in creating new money to cover their financial obligations. Consequently, the value of their currencies may weaken compared to Bitcoin.
This makes Bitcoin the “hardest money ever created.”
History rhymes but it may not repeat itself
Several experts have shared their views on how the Bitcoin halving may impact the price of BTC. According to Edwards, there are three potential outcomes for Bitcoin following the halving event.
In the first situation, it’s assumed that the cost of Bitcoin will dramatically increase. In the second, around 15% of Bitcoin miners are expected to power down their equipment and exit the industry. Lastly, transaction fees are predicted to remain significantly higher than usual in the third circumstance.
Edwards says he expects “a bit of all three” to happen.
“Bitcoin’s days under $100K are numbered.”
Instead of relying too heavily on past Bitcoin halving events as a predictor for future performance, Glassnode advises caution, pointing out that the market behavior during these periods has shown significant variation and may not accurately represent current conditions.
“We do see both diminishing returns and a shallower total drawdown effect over time, which is a natural result of the growing market size and the scale of capital flows required to move it.”
Glassnode assessed BTC price performance between the cycle low and the halving and found that while there was a stark similarity between 2015, 2018 and the current cycle with between 200% and 300% price increases, the 2024 one was different as it broke the previous all-time high before the halving event.
“The ATH we saw in March comes off the back of both a historically tight supply and the remarkable demand interest brought online via the new spot ETFs.”
According to Glassnode, the price response in the year following the second Bitcoin halving was more pronounced than earlier events. However, it’s important to note that the current market conditions and landscape differ greatly from those experienced during past halvings.
According to Glassnode, while it’s possible for Bitcoin‘s price to experience explosive growth similar to past trends, there’s a chance the market may not follow the same pattern this time around.
While Hayes acknowledges that reaching a price of $1 million for Bitcoin (BTC) from its current levels might not be an insurmountable task, he believes that the driving force behind BTC’s previous dramatic rise from zero may have been the explosion of the sovereign debt bubble.
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2024-04-25 00:40