This Year Bitcoin's Halving Is Unlikely To Yield A 600% Return

In the last 30 days, Bitcoin's price volatility has been around 4%, a significant drop from the nearly 18% observed in April 2013. This trend suggests it's becoming more akin to traditional equity.

Source: www.enuygun.com

With the countdown ticking towards Bitcoin's halving, the frenzy surrounding ETFs has accelerated its arrival. Just a couple of weeks remain before the much-anticipated event, dominating discussions among crypto investors and media alike. However, the current market landscape necessitates a shift in trading strategies. Historically, the halving has been synonymous with significant volatility spikes. A typical pattern involved a sell-off of 30%-40%, succeeded by a meteoric rise to a new all-time high within approximately 480 days post-halving. Yet, the introduction of the spot Bitcoin ETF has disrupted this pattern.

To gauge Bitcoin's future price trajectory, closer attention must be paid to its volatility. Despite the pre-halving excitement, recent months have seen relatively mild drawdowns compared to previous cycles. Corrections have been shallower, not surpassing 25%. Even the most recent dip, around 15%, swiftly rebounded as Bitcoin surged towards the $70,000 mark. This subdued sell-off signals a potentially less dramatic rally post-halving. While Bitcoin will likely undergo its customary post-halving sell-off followed by a surge to new highs, the returns may not be as staggering as seen in previous cycles. However, they will still outpace those of traditional equities.

Two factors contribute to this shift. Firstly, the proportion of long-term Bitcoin holders has soared to a record high, with approximately 14 million BTC, representing over 70% of the total circulating supply of 19,670,043 BTC. In recent months, there's been a surge in BTC withdrawals from exchanges to cold wallets as more holders adopt a diamond hands approach. The arrival of the spot Bitcoin ETF has significantly altered market dynamics. Currently, ETFs are absorbing more BTC supply from the market than miners can produce. On average, spot BTC ETFs have been accumulating approximately 10,000 BTC daily since their launch, while miners are generating only 900 new BTC per day. This heightened demand relative to the available supply is exacerbating scarcity and fueling upward price momentum.

Importantly, this shift also results in a significant reduction in long-term volatility. ETF investors tend to have a more long-term outlook compared to the average crypto trader. Despite the recent volatility spike leading up to the halving event, it remains considerably lower than the levels observed in the previous halving. Data indicates that the 30-day historical BTC/USD volatility has declined from a peak of nearly 18% in April 2013 to approximately 4%. The reason for this is that the investors currently entering the spot Bitcoin ETFs are the same individual investors and institutions who have invested trillions in S&P 500 ETFs. These investors tend to have a long-term investment horizon, with three years being the minimum investment term. Their buying or selling decisions are influenced by long-term factors such as macroeconomic conditions, structural market shifts, and the potential for long-term returns.

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