The price of Bitcoin declined throughout the past week, opening Monday’s trading at $40,936.
The largest market-cap asset is attempting to maintain strength around $41,000, and if it fails to stabilize above this level, further downward correction in the price of Bitcoin is likely.
From my perspective, cryptocurrency whales may be preparing to change the direction of Bitcoin. This is evident through the sudden drop in momentum and the increase in reserves of stable coins on exchanges.
With the approval of the Bitcoin exchange-traded fund (ETF) last week, investors are anticipating two major events: Bitcoin’s fourth halving and the approval of an Ethereum ETF.
While the latter will take some time, considering the Securities and Exchange Commission’s (SEC) strict stance on classifying Ethereum and constructing exchange-traded funds similar to Bitcoin.
In the halving event, Bitcoin blockchain rewards are halved once every four years or after mining 210,000 blocks. So far, Bitcoin has undergone three halving events, leading to a reduction in block rewards from 50 to 6.25 Bitcoin. The fourth halving is expected to occur on April 24, 2024, resulting in a further reduction in miner rewards to 3.125 Bitcoin per block.
Due to expectations of this negatively impacting the market’s supply shock, investments rise, and liquidity is injected before the halving event, causing a significant price increase. Considering that Bitcoin has nearly completed its bear market in 2023 and initiated an upward trend, it is likely that this halving event will push the cryptocurrency’s price even higher in the medium term.
To clarify, a negative supply shock occurs when demand remains the same or increases, but the supply decreases. This leads to an increase in demand for the underlying asset, also known as the market cap. This makes the halving event crucial for the markets in the coming period.
Furthermore, Grayscale, one of the largest cryptocurrency asset management companies and a provider of Bitcoin Spot ETFs, has sold 60,000 BTC.
While it seems that the company’s sale of a large quantity of assets will increase selling pressure on Bitcoin, I believe that profit-taking activities by large portfolio investors, known as “whales,” may have contributed to the recent decline in Bitcoin’s price after the approval of the exchange-traded funds, which is a primary reason for Bitcoin’s recent decline.