Grayscale noted that strong inflows into spot Bitcoin ETFs would significantly absorb the selling pressure coming from BTC miners after the halving 2024.
Over the last weekend, Bitcoin registered strong gains, with the BTC price shooting all the way to $48,489. Despite partial retracement, Bitcoin has managed to hold above $48,000. Last week, the world’s largest digital asset manager Grayscale stated that some fundamental changes to Bitcoin’s demand and supply could have a greater impact on Bitcoin’s price. This will be especially true after the Bitcoin halving event in April 2024.
In the past, Bitcoin price has rallied significantly after every halving event. Of course, it is because of the scarce supply of Bitcoins after each halving. However, Grayscale thinks that a new factor will come into play this time with the arrival of the Bitcoin exchange-traded-funds (ETFs). The report by Grayscale notes that “beyond generally positive on-chain fundamentals, Bitcoin’s market structure looks beneficial to price post-halving”.
Bitcoin Ordinals Open New Revenue Stream for Miners
Post the Bitcoin halving of 2024, the mining reward will drop from the current rate of 6.25 BTC per block to 3.125 BTC. Miners have been preparing themselves for the impending transition by liquidating coins and raising funds during the final quarter of 2023 to enhance liquidity. This includes a proposed $750 million equity raise by Marathon Digital, as outlined in the report.
Also, the deflationary mechanism of Bitcoin halving would mean 50% of their revenue. As block rewards decrease and the mining difficulty of the Bitcoin network continues to rise, miners may find themselves in a challenging situation.
However, the bright side for miners emerges from transaction fees associated with Ordinals activity on the Bitcoin chain, offering a substantial revenue stream. Miners have received over $200 million in transaction fees related to Ordinals thus far, constituting approximately 20% of their total revenue from such transactions, reports Grayscale.
This earnings opportunity presented by Bitcoin Ordinals could effectively ease the selling pressure coming from Bitcoin miners. Besides, the recent launch of Bitcoin ETFs could also counter this selling pressure.
Bitcoin ETFs to Absord Selling Pressure
Grayscale suggests that the recent introduction of nine Bitcoin ETFs on Wall Street could act as a counterbalance to the selling pressure exerted by miners. The emergence of Bitcoin ETFs has the potential to absorb significant sell pressure, thus reshaping the market structure by introducing a new, consistent demand source. Grayscale added that such a development bodes well for Bitcoin’s price stability.
Bitcoin ETFs have garnered substantial demand, with the newly launched products achieving a significant milestone. Within their initial 20 trading sessions by February 9, they collectively reached an asset under management (AUM) of $10 billion. Leading the pack is BlackRock’s iShares Bitcoin Trust, boasting BTC holdings valued at $4 billion, as per data from BitMEX Research.
“A sensitivity analysis of daily net inflows […] suggests that at the higher end, the reduction in sell pressure could mirror the effects of another halving, fundamentally transforming Bitcoin’s market structure in a positive way,” added Grayscale.
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