The Bitcoin halving in 2024 is fast approaching and according to the new report from Grayscale, it will be exceptional! Although previous halvings have been associated with price rallies, there are many fundamental developments that make this one unique. The Bitcoin ecosystem has evolved significantly, supported by the rise of ordinals, spot Bitcoin ETFs and sustainable on-chain activity.
Impacts on supply and miners
Halving will reduce Bitcoin issuance from 6.25 to 3.125 BTC per block, posing a challenge to miner revenue. However, miners prepared by raising funds and selling reserves. Marathon Digital completed a $750 million hybrid capital raise, while others like Core Scientific and Stronghold raised $55 million and $15 million respectively.
Additionally, despite higher transaction fees, the rise of ordinals (with 59 million assets registered to date) and layer 2 solutions offer new sources of revenue for miners. Ordinary listing fees generated more than $200 million in transaction fees. Solutions like Stacks introduce completely expressive smart contracts on Bitcoin.
The community is exploring Layer 2 rollups similar to those undertaken by Ethereum to improve scalability. The growing interest in Taproot-compatible wallets indicates a collective movement toward solving these challenges.
Structure of the bitcoin market
Historically, halvings introduce selling pressure into the market from miners. However, Bitcoin ETFs are likely absorbing some of this pressure.
With this halving, the issuance will increase from 6.25 to 3.125 BTC per block, or approximately $14 billion per year to $7 billion. Net inflows into spot Bitcoin ETFs could represent a counterbalance to this sales pressure.
Net initial inflows into these products amounted to $1.5 billion in 15 trading days. Assuming $10 million in daily net inflows, this could represent 50% of daily issuance, fundamentally transforming the market structure.
Unlike previous bitcoin halvings, that of 2024 takes place in a fundamentally different context. And this, with sustained on-chain activity and a positive evolution of the market structure. These factors suggest that the 2024 halving could have a lasting positive impact on Bitcoin, strengthening its unique position as a deflationary and decentralized digital asset.
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