Bitcoin’s Supply Will No Longer Match the Demand After the Completion of the Halving
Bitcoin’s recent halving event has sparked predictions of a significant shift in market dynamics, with analysts at Bitfinex suggesting that the cryptocurrency’s demand could increase fivefold while its supply diminishes. The mining reward for each block of Bitcoin has been reduced from 6.25 BTC to 3.125 BTC, resulting in a substantial drop in the daily addition of new coins to the supply. This decrease in mining incentives could lead to a daily supply valued at around $30 million, which is five times less than the average daily demand observed in U.S. spot ETFs.
Bitfinex analysts have observed a decrease in the daily issuance of Bitcoin since the halving event, estimating that the new supply of mined Bitcoin is now valued between $40 and $50 million. This figure is expected to further decline to approximately $30 million per day as economic pressures force smaller mining operations to cease. In contrast, the average daily net inflows from spot Bitcoin ETFs exceed this figure, standing at over $150 million.
Glassnode data supports these observations, indicating 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 average of about 900 BTC. This change signals a supply squeeze in the Bitcoin market.
To prepare for the halving, Bitcoin miners strategically sold their reserves, which, combined with the introduction of spot ETFs, helped prevent a significant price decline. Bitfinex suggests that miners either sold their BTC holdings or used them as collateral to upgrade their equipment and infrastructure, resulting in a substantial decrease in the amount of Bitcoin sent to exchanges.
Following a halving event, miners’ revenues typically diminish, causing short-term market volatility and price drops. However, Bitfinex notes that these negative impacts are usually temporary, as prices often rise and mining operations expand to compensate for the reduced rewards.
Since the halving, investors are increasingly opting to take direct custody of their coins, reducing the supply available in the market. Bitfinex analysts have observed significant Bitcoin exchange outflows and a growing preference among investors to store their holdings in cold storage. Despite active sales by long-term holders, there has not been the typical price decline expected before a halving, suggesting that new market participants are effectively absorbing the selling pressure.
Bitcoin’s price currently stands at $65,910, marking a rise of over 5% since the halving, contrary to expectations of a price correction.
