The anticipated fourth Bitcoin halving, scheduled for April 2024, has triggered several deep dives into supply dynamics and its impact on investors and the market.
According to GlassNode’s latest report, it highlights a looming historic shortage in Bitcoin supply and some revelations about how this trend, along with investor accumulation patterns, could significantly influence the cryptocurrency’s valuation in the coming months.
The key according to the report lies mainly in the scarcity of BTC supply, a phenomenon evidenced by measures such as ‘available supply’ and ‘supply storage’.
The Halving, which occurs every 210,000 blocks, will reduce the issuance of new coins by 50%. This event, expected in April 2024, raises questions about its role in the Bitcoin market appreciation cycle.
GLASSNODE ANALYSIS FOCUSES ON THREE STAGES
The Available Supply Assessment examines how much Bitcoin is in circulation for trade, using metrics such as ‘coin age’ and the amount in the hands of short-term investors. This offers insight into market liquidity.
Measuring Storage Supply analyzes how investors hold Bitcoin over the long term, looking at metrics such as ‘coin age’ and migration from exchange wallets to cold storage. This indicates retention and security preferences.
Analysis of the Impact of Capital Flows on Market Valuation focuses on how the entry and exit of money into Bitcoin affects its valuation. It uses Realized Cap to understand how long-term investors interact with the market and how much capital is needed for significant changes in capitalization, providing insights into market liquidity and stability.
We recommend looking at the report in detail to find graphs and metrics for each parameter discussed.
The report comments that Bitcoin miners have historically distributed the majority of their income to cover costs. With the halving, the monthly distribution to miners will fall from $1 billion to $500 million, presenting a significant challenge to capital inflow into the ecosystem.
It highlights that the current availability of Bitcoin is at historically low levels. Metrics like ‘hot supply’ indicate that only 5% to 10% of the circulating supply is participating in daily trading.
Additionally, the migration of coins from exchange wallets to cold storage and custody suggests a preference for long-term holding.
Investor accumulation, measured by the increase in ‘stored supply’, has notably outpaced issuance rates, especially in the months leading up to the previous halvings. This suggests that investors anticipate the event as a catalyst for Bitcoin’s appreciation.
On the financial side, the analysis of capital flows highlights the need for a significant increase in realized capitalization to achieve a $1 change in Bitcoin’s market capitalization.
This indicator suggests relatively tight liquidity, aligning with the previously discussed supply shortages.
Detailed metrics such as the decline in ‘coin age’ and the migration of coins into long-term storage underline investors’ preference for holding as the event approaches.
With the halving scheduled for April 2024, the market is entering a crucial period, where anticipated supply shortages and investor accumulation could trigger substantial changes in price dynamics and cement Bitcoin’s position as an asset. valuable in the global financial landscape.