- Each bitcoin halving sharpens the narrative of bitcoin as not just a currency, but a scarce digital asset, akin to digital gold.
Bitcoin exchanges have only nine months of supply at current prices due to the upcoming cryptocurrency halving, which reduces supply by 50 per cent.
Ben Zhou, Co-Founder and CEO of Bybit, one of the world’s top three crypto exchanges by volume, said that post-halving, the bitcoin supply squeeze is expected to intensify.
The halving is expected to take place on April 19 or 20, depending on the current rate at which bitcoins are created.
In bitcoin’s first halving in November 2012, bitcoin’s price rose from $12.35 to $127 five months later. After the second halving in 2016, bitcoin’s price doubled to $1,280 within eight months. And between the third halving in May 2020 and March 2021, bitcoin’s price rose from $8,700 to $60,000.
Reserves depleting faster
According to the Bybit report, bitcoin reserves in all centralised exchanges have been depleting faster.
“With only 2 million bitcoins left, if we assume a daily inflow of $500 million to bitcoin spot ETFs, the equivalent of around 7,142 bitcoins will leave exchange reserves daily, suggesting that it will only take nine months to consume all of the remaining reserves.”
This technical event, written in bitcoin’s code, happens every four years. In simple terms, it is when the rewards for bitcoin miners are cut in half. This reduces the pace at which new bitcoins enter the market.
Moreover, the halving will make bitcoin twice as rare as gold, according to the report.
“The Stock-to-Flow (S2F) ratio is calculated by dividing the circulating supply of a commodity by its annual production, yielding a gauge of scarcity,” the report says.
“Bitcoin’s S2F ratio is around 56 before the upcoming halving, while gold is 60. After the halving in April 2024, bitcoin’s S2F ratio is projected to double to 112.”
Safest investment choice
Given this institutional investors have been ahead of the curve and positioned for this event in advance, especially since the US approval of Bitcoin Spot ETFs.
Zhou said that each bitcoin halving sharpens the narrative of bitcoin as not just a currency, but a scarce digital asset, akin to digital gold.
“This upcoming halving in 2024 will thrust bitcoin into an era of unprecedented scarcity, making it twice as rare as gold.”
The report stated that bitcoin is becoming the safest investment choice even for the most sophisticated investors in the crypto field as the price correlation between Bitcoin and the rest of cryptocurrency has been consistently high, and investment in bitcoin has also been regarded as the cryptocurrency with the lowest beta.