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Lower ETF demand, unrealized gains may weigh on BTC selling pressure post-halving
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2024-03-26 07:03:40
Ana Paula Pereira13 hours agoLower ETF demand, unrealized gains may weigh on BTC selling pressure post-halvingMarket dynamics introduced by spot Bitcoin ETF demand may play a role in making the 2024 halving unique.2158 Total views14 Total sharesListen to article 0:00NewsOwn this piece of crypto historyCollect this article as NFTJoin us on social networksA slowdown of inflows to spot Bitcoin exchange-traded funds (ETFs) combined with a high volume of unrealized gains from traders could lead to bearish pressure on the Bitcoin price after the upcoming halving event.
According to Julio Moreno, head of research at CryptoQuant, unrealized profits from Bitcoin’s recent rally are driving up selling pressure. An eventual slowdown of inflows to spot Bitcoin ETFs in the coming months could result in further pressure on Bitcoin (BTC) prices.
CryptoQuant’s net unrealized profit and oss (NUPL) indicator supports the analysis. The indicator’s warning sign is the 0.7 mark, indicating that Bitcoin investors may be ready to take profits, further driving prices down and increasing selling pressure.
On March 17, the NUPL indicator reached 0.606, up 0.41% from the previous 24 hours, despite recent BTC price corrections.
“For a bearish outlook for price: 1. Slowdown in ETF Bitcoin purchases and 2. Getting into the halving at a high level of unrealized profits for traders, as highly likely traders would sell to take profits,” Moreno said about possible price-depressing events.NUPL indicator. Source: CryptoQuant
The Bitcoin ETFs recorded one of their lowest net inflow days on March 14, with just $132 million in net activity, their lowest level in eight trading sessions and an 80% decline from the previous days.
A possible downward trend, however, may not be as severe as previous bear markets, as institutional investors typically engage in portfolio rebalancing strategies, which could temper volatility rather than increase it, James Butterfill, head of Research at CoinShares, told Cointelegraph.
“Volatility in the last bull market in 2021 was 120%. It is now only 45%, and prices have risen above all-time highs. We believe this is due to the dampening effect of portfolio rebalancing,” he said.
Bitcoin ETFs have so far been in high demand. The cumulative net inflows into the crypto products surpassed the $12 billion mark on March 15, while industry insiders anticipate further demand as brokerage firms speed up due diligence to offer clients Bitcoin ETFs.Miners brace for impact
Capital flowing through Bitcoin ETFs is counteracting the negative price effects of miners sales ahead of the halving — Bitcoin’s deflationary mechanism.
The halving cuts the reward for mining new blocks by 50%, thus reducing the rate at which new Bitcoin are generated. This year’s reduction will slash Bitcoin miner rewards from 6.25 BTC to 3.125 BTC per block.
The cost of mining, however, remains the same or may even increase as miners usually improve operations to remain profitable after the event. CoinShares anticipates the average cost of production post-halving for crypto miners to be at $37,856.
“Looking at price performance of the miners year to date highlights investor concerns for the miners around the halving, but I believe many are being tarred with the same brush, so to speak, as average costs to mine Bitcoin vary greatly, but those with higher costs to seem to have been hit harder,” said Butterfill.Miners cost production per Bitcoin post-halving. Source: CoinShares.
Historically, miners have sold more of their BTC reserves before the halving to maximize profits, and 2024 is no exception. Data from CryptoQuant shows miner reserves at their lowest level in two years, with 1.81 million Bitcoin held by miners on March 15.
The Bitcoin halving takes place every four years, with the next expected to happen around April 19, 2024.
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