Understanding the Dip: Bitcoin's Price Post-Halving
[TL; DR]
The introduction of spot Bitcoin ETFs in the United States has changed the post bitcoin halving price dynamics.
When the bitcoin halving in 2024 occurred, BTC was already in an overbought market condition, which resulted in the recent price slide.
The Runes and Ordinal inions may lead to bitcoin growth in the near future.
Introduction
The activation of the April 2024 halving on the 20th of the month created much hype in the crypto sector, with a high anticipation that we might have a BTC bull run soon after that historic event. Weeks later, the crypto market is not sure of the exact direction the BTC price will take in the near to long-term periods.
This article will analyze possible short-term and long-term Bitcoin price movements. We will also explore the factors influencing the current BTC price trend and focus on other catalysts that may determine the future bitcoin price.
Bitcoin’s Price Dynamics Post-Halving
Based on the current market reactions to the bitcoin price dynamics in the post-halving period it is clear that things have not gone in the way the wider crypto community has expected. Basically, what many crypto participants have failed to realize is that there are three different possibilities in terms of price movements following any bitcoin halving. Let’s briefly discuss this before analyzing them in the context of our current Bitcoin market scenario.
Bullish Momentum: Many crypto experts believe that a bullish momentum should follow a halving since the BTC supply decreases immediately after the event. Particularly, after the 2024 halving event the analysts thought that a sharp fall in the supply of BTC and an increase in institutional investment in the number one cryptocurrency would lead to a strong BTC rally.
The bitcoin price movements during previous post halving periods supports this notion. For example, after the first halving event that occurred in 2021 the price of bitcoin increased by over 1,000%. Similarly, after the second halving it rallied by over 200% while it increased by at least 600% after the third one. Based on such price movements, some bitcoin maximalists were expecting the BTC price to surge immediately after the 20 April halving event.
Bearish Correction: Some sceptics argue that there is no defined price trajectory for bitcoin after the halving event. In fact, they strongly believe that bitcoin may undergo a temporary price correction or a period of consolidation after the halving. However, that depends on the prevailing crypto market sentiment.
Sideways Movement: The third possibility is that bitcoin may experience a sideways price movement after the halving event. This occurs when the potential effects of the halving is mitigated by other factors including macroeconomic ones. For example, geopolitical tensions in the Middle East or a hike in interest rates in leading global economies like the United States or United Kingdom could contribute to such a scenario.
However, the post halving period in the past showed various phases which bitcoin may undergo. Immediately after the halving events there were expansion phases which were characterized by price surges caused by positive news and market Optimism.
After the peak of a bull run a contraction phase characterized by high selling pressure and declining BTC prices would follow. Finally, bitcoin would enter a consolidation phase represented by market equilibrium and price stabilization. The following graph shows bitcoin price movements during some past bitcoin’s post halving periods.
Bitcoin Halving Cycles: Cointelegraph
The image above shows the expansion phase, contraction phase and correction phase in the past post halving periods.
The Current Bitcoin Price Dynamics within the Post-Halving Period
The current bitcoin price movement is influenced by two things, the halving event and the launch of spot bitcoin ETFs in the United States. Before the halving event the main driver of the bitcoin price surge was capital inflow from spot BTC ETFs in the United States.Specifically, after the approval of the BTC ETFs in January there was much capital inflow into the bitcoin market. However, towards the halving event the funds inflow stalled leading to a bitcoin ranging market. Subsequently, in May the bitcoin price slumped.
The current bitcoin price drop started a few weeks before the halving event. As a fact, the BTC price fell to around $63,000 before gaining marginally to reach $65,011 on 20 April. However, after that date bitcoin experienced further gains to reach a high of $67,020 on 24 April. Once again, it lost much momentum as it slid down to $56,803 on 1 May. Since then it has been ranging mostly between $57,000 and $64,000 as the next image denotes.
BTC Price between 20 April and 10 May – CoinGecko
As observed on The Graph, the purple line indicates the BTC price on the halving date. Currently, its price is far below that level showing a depressed bitcoin market. Nevertheless, the current post halving price dynamics are not surprising considering that BTC had a strong rally for about three months before the halving event. During that perio, it attained an all-time high of $73,737.94 on 14 March. Presently, the bitcoin price is 14.6% lower than that ATH.
Based on the current cryptocurrency market analysis the main cause of the bitcoin price upswing during that period were the bitcoin ETF inflows. Nevertheless, the post bitcoin halving price fall has surprised many crypto investors who had anticipated a crypto bull run to occur, starting in April. There are several reasons why the BTC price plummeted during the post bitcoin halving 2024 period.
As pointed above, bitcoin had a strong bull run between mid-January and the first three weeks of April. It is the first time for bitcoin to experience such a strong run a few months before the halving event. Mati Greenspan, Quantum Economics founder, also noticed that such a bitcoin price move before a halving event was a unique occurrence.
In an interview with Cointelegraph, Greenspan said, “What’s unique about this latest Bitcoin halving is the incredible bull run and price action leading up to it. Even considering this recent pullback, Bitcoin has still been up 35% since the start of the year.”
According to Greenspan the economic impact on Bitcoin price is clear and strong. He/she added, “Considering the expectation of yet another Fed pivot and what’s happening in the stock market, Bitcoin’s current price action is hardly a surprise.” Similar macroeconomic factors have also affected the performance of the stock market which is also underperforming.
JPMorgan Analysts’ Predictions for a Post-Halving Price Drop
Some crypto market analysts’ bitcoin price forecasts pointed to the present situation. For example, JPMorgan analysts’ bitcoin price prediction indicated a BTC downswing in the post halving 2024 period. As per TheBlock, in March the JPMorgan analysts predicted that the bitcoin price would fall below $60,000 soon after the halving event. They even suggested that it might reach $52,000. Already, on 1 May the bitcoin price reached a post halving low of $56,803, a few thousand dollars shy of $52,000.
Nikolaos Panigirtzoglou, a leading JPMorgan investment analyst said, “We do not expect bitcoin price increases post halving as it has been already priced in. In fact we see downside for the bitcoin price post halving for several reasons.” The JPMorgan analysts’ bitcoin trading insight was based on the fact that during a few months before the halving event BTC was in overbought market conditions which indicated an eminent downswing.
According to the same source, Pedro Lapenta, Hashdex research head, shared similar sentiments. He said, “With bitcoin seeing seven straight months of gains, it’s typical for the period following a halving to involve modest increases or corrections, as we’re observing now.”
A related explanation is that the current correction is a result of profit taking by many crypto investors who acquired bitcoin during 2022 and 2023. Many spot ETF investors may have been taking profit as well after the strong share appreciations since January. For example, within the last few weeks some ETF investors have been exiting Grayscale Bitcoin Trust ETF (GBTC).
Role of ETF Inflows in Bitcoin’s Recent Rally
We have talked about the impact of bitcoin ETF inflows towards the recent BTC rally. True, the spot bitcoin ETFs contributed to the recent bitcoin uptick. Many investors interpreted the United States’ approval of bitcoin ETFs as an acceptance of BTC as a legitimate investment asset. As a result, soon after their launch many retail and institutional investors invested in the ETFs. Some even acquired bitcoin on exchanges resulting in its price surge.
As the demand for bitcoin ETFs rose significantly within the first three months of their launch the crypto ETF issuers such as BlackRock, Fidelity, and ARK purchased BTC at an unprecedented level leading to its price spike. For instance by 15 February the bitcoin sponsors had acquired over 251,888 BTC. Therefore, they purchased more bitcoin than what was being produced resulting in a shortage which pushed its value up.
Beyond the Halving: Other Catalysts for Bitcoin’s Growth
Despite the bitcoin investment trends explained above, there are other factors that may contribute to bitcoin’s growth during the post halving period. The development that recently occurred on the bitcoin blockchain including the launch of Runes and ordinals inions have ignited renewed BTC’s utility.
Runes, which are fungible tokens, were introduced on the halving date while Ordinals were launched in January 2023. The Runes protocol enables developers to create fungible tokens like meme coins on the bitcoin blockchain. These two on-chain products have led to a surge in the demand for the bitcoin network.
Conclusion
Profit taking on the part of bitcoin and ETF investors has contributed to the decline in the BTC price. Also, the fact that the halving event 2024 occurred at a time when bitcoin was in an overbought market condition explains its recent price dip. However, a resurgence of ETF inflows and a rise in the demand for Runes and Ordinals may result in renewed interest in bitcoin which may lead to future rallies.
FAQs about Bitcoin
Why is bitcoin price falling?
One reason the bitcoin price is falling is profit taking on the part of investors who acquired the cryptocurrency during 2022 and 2023. Some spot bitcoin ETF investors may also be selling their shares thereby reducing net capital inflows in the BTC ETF market.
Will bitcoin go up again?
The bitcoin price may go up again when both retail and institutional investors demand more of it than in the past. The approval of spot BTC ETFs in other countries may also push its price up.
Does bitcoin price go down after halving?
After halving the bitcoin price may rise, fall or move sideways depending on the prevailing market conditions. However, after the April 2024 bitcoin halving the price of bitcoin rose for a few days before falling. Currently, bitcoin is moving sideways showing that it may be in a market accumulation phase.
Does bitcoin halving reduce supply?
Yes, bitcoin halving reduces BTC supply since it leads to the reduction of mining rewards. As a fact, the 2024 halving reduced the mining reward from 6.25 BTC to 3.125 BTC.
