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Bitcoin’s price rise is no longer based on the traditional halving of Bitcoin’s supply.
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Bitcoin’s 2024 halves shows the worst price performance after an event in its history.
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Experts debate whether halving still affects Bitcoin’s price despite growing illiquidity.
Bitcoin’s halves have been traditionally associated with price increases, fueled by reduced miner rewards which create scarcity. Recent analysis has challenged this long-held belief. Experts claim that Bitcoin’s increasing illiquidity could disrupt the usual price predictions associated with halving events.
Jasper De Maere is the Research Director at Outlier Ventures who spearheads this dissenting opinion. He questions the widely held assumption that Bitcoin price increases are automatically triggered by halvings. De Maere stresses that, while halvings reduce the creation of new Bitcoins, the existing supply becomes increasingly illiquid when holders move their Bitcoins into long-term storage. This reduces the market liquidity and could limit price movements traditionally associated with halving.
The crux of this argument is how the rising illiquidity affects market dynamics. The traditional supply-demand model may not be applicable, as more Bitcoin is held in long-term wallets. De Maere says this shift may dampen the anticipated price spike that many expect after the halving.
Recent data confirms this. The 2024 Bitcoin halves are exhibiting the weakest performance in the history of the cryptocurrency, with a drop of 8% within 125 days. This is in stark contrast to previous halvings such as the one that occurred in 2016, when the price increased by 10 percent. De Maere points out that the shrinking block reward now has a minimal effect on the market as Bitcoin’s trading volumes and liquidity have greatly expanded over the years.
Traditionalists, meanwhile, maintain that the halving of new Bitcoins entering circulation will continue creating scarcity and driving prices higher. They maintain that despite an increasing illiquidity in the supply, the fundamental force will still generate enough market pressure to drive prices higher. According to them, the halving is still a crucial event that determines Bitcoin’s value, no matter how much of it is stored in long-term storage.
Bitcoin’s future price is still uncertain. As the next halving nears, the debate about illiquidity and its impact on market dynamics continues. Experts are divided over whether Bitcoin’s prices will follow past patterns or depart from tradition. This is due to the record-high levels of illiquid supply.
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