is trading above $60,000, putting it within striking distance of setting a new all-time high. This would be an unprecedented move for the top Cryptocurrency by market cap, which historically has only made a new price record only after each halving event.
Could BTC set a new record in more ways than one: by reaching a new all-time high before the halving for the first time ever? Let’s take a look at the data.
Why the Bitcoin halving is important
The Bitcoin halving is one of the most anticipated and impactful events for the Cryptocurrency. It reduces the supply of new coins entering circulation. The halving cuts the reward miners receive for processing blocks in half. This means fewer new BTC are created over time, making the supply more scarce.
Reduced supply paired with steady or increasing demand can lead to higher prices according to economic principles. Many investors see halvings as potential catalysts for bull runs. However, this time around, there are unique factors impacting supply and demand.
Unprecedented price action in Crypto
Unlike past Crypto market cycles, which have been suspected to be primarily driven by the supply and demand dynamics created post-halving, Bitcoin price finds itself in an unusual spot: just below all-time high prices.
In all previous market cycles, BTCUSD had over 100% or more to gain at the time of each halving before setting a new all-time high. In fact, it took anywhere between two to seven months after the halving before new all-time highs were set. Yet this time, is around 10% away from making a new all-time high before the halving ever arrives.
What’s behind the change in dynamics?
Since market cycles are driven by global liquidity and supply versus demand, what has changed in 2024 that wasn’t a factor in the past? For one, China has begun injecting liquidity into the global economy in an attempt to save its financial markets.
More importantly, is the impact of the new spot BTC ETFs that are beginning to pick up in demand and net flows. Each ETF provider must purchase a corresponding amount of Bitcoin based on the demand for ETF shares. This week, ETFs purchased a grand total of 9,163 BTC in a single day. The same day, BTC miners only produced around 900 BTC. This suggests that ETFs are currently exceeding the new supply of Bitcoin by ten times a day.
Are institutions front-running the halving?
If ETFs are currently absorbing ten times the new supply of BTC, then this will be twenty times the amount of new BTC being mined if nothing changes in demand over the next two months. When the halving occurs in April, the block reward in BTC that miners receive is slashed in half.
Understanding that the supply will soon dwindle further, and how strong the ETF demand is, simple math suggests that the demand is aggressively outpacing the available supply. The only other way to buy new coins is to get holders to sell. And due to the conviction of Bitcoin holders who often hold for years at a time, the only solution to get them to sell is to bid prices up higher.
Strength confirmed in the Crypto market
The early increase in buying pressure can be seen in Bitcoin’s monthly Relative Strength Index chart. In all prior instances, BTCUSD reached over 70 on the RSI either at the halving, or in the months following. Only in 2024 are we seeing the monthly RSI over this key bullish level.
Interestingly, a reading over 70 on the RSI suggests that Bitcoin is overbought. However, as history shows, BTCUSD remains significantly overbought for months at a time during the most powerful phases of each bull run. With BTC above 70 on the monthly RSI, and incredible demand and dropping supply, there is no telling what might happen during the rest of the year.
Raising returns using PrimeXBT trading tools
Rising over 70 on the RSI has seen a 40% increase in Bitcoin price in a single month. While this isn’t a meagre return, by using up to 200:1 adjustable leverage, the same 40% return could have provided an 8,000% return on investment.
The award-winning trading platform also includes all the risk management and charting tools necessary to protect your capital and get the most out of the bull run before it ends. PrimeXBT’s competitively low trading fees, with maker and taker fees at just 0.01% and 0.02%, give traders more room to maximise profits from market moves.