Bitcoin ETF Slowdown and Miners' Reserve Crunch: Potential Price Pressure Ahead of Halving
Summary:
A decrease in the accumulation of Bitcoin ETFs and abundant unrealized profits from traders could impose bearish pressure on Bitcoin's value following the upcoming halving event. This view, shared by CryptoQuant's research head, suggests increased selling pressure due to potential slump in ETF purchases. Despite a potential bearish downturn, experts believe portfolio rebalancing strategies by institutional investors could cushion Bitcoin's volatility. As Bitcoin's next halving event looms, miners prepare for financial impacts amid decreasing Bitcoin reserves and constant or increasing operational costs.
The slow down in accumulating Bitcoin exchange-traded funds (ETFs), coupled with the high degree of unrealized gains by traders, could trigger bearish pressure on Bitcoin (BTC) prices post the halving event. Julio Moreno, CryptoQuant's research head, believes that Bitcoin's recent rally has led to the build-up of unrealized profits, which could upturn the selling pressure. A possible decrease in ETF purchases could exert more pressure on Bitcoin prices in the upcoming months.
CryptoQuant's Net Unrealized Profit and Loss (NUPL) indicator aligns with this analysis, suggesting that Bitcoin investors may be on the cusp of cashing in their profits, thereby causing a slump in prices and a surge in the selling pressure. The NUPL indicator's threshold level is 0.7. On March 17, it rose to 0.606, marking an increase of 0.41% from the past 24 hours, in spite of the recent Bitcoin price corrections.
Moreno suggests that the decrease in Bitcoin ETF purchases and the propensity of the high unrealized profits leading into the halving could be potential catalysts for a bearish price trajectory.
Bitcoin ETFs experienced one of their slowest investment days on March 14, with only $132 million in net activity, which marked an 80% drop from the days before and the lowest in eight trading sessions. While a potential bearish downturn may loom, it might not be as severe as previous ones. According to James Butterfill, research head at CoinShares, institutional investors' predilection for portfolio rebalancing strategies might cushion the volatility rather than incite it.
Despite the increasing demand for Bitcoin ETFs, with the total net inflows surpassing $12 billion on March 15 and industry insiders predicting further demand due to accelerated due diligence by brokerage firms, miners are preparing for potential repercussions.
The forthcoming halving of Bitcoin, a mechanism that halves the rewards for mining new Bitcoin blocks, is counterbalancing the negative price effects of Bitcoin ETFs. Post-halving, miners will see their rewards dwindle from 6.25 BTC to 3.125 BTC per block. The operational cost of mining, though, would likely remain static or even rise. CoinShares anticipates the average production cost to be $37,856 post-halving.
Butterfill suggests that miner performances this year reflect investor concerns about the halving, particularly for those facing higher operational costs. This concern is mirrored in the decrease in miner reserves, with CryptoQuant's data showing Bitcoin reserves at a two-year low on March 15.
The Bitcoin halving, scheduled to occur every four years, is slated for April 19, 2024. The phenomenon has led to concerns regarding substance abuse among crypto traders, highlighting the stressful nature of the industry.
Published At
3/26/2024 1:54:40 PM
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