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The Bitcoin network recently completed its fourth halving, a significant event that halves the reward for miners per validated block, now down to 3.125 BTC. This process, planned in the network’s initial programming, occurs after the creation of the 840,000th Bitcoin block. This adjustment is a key mechanism to promote Bitcoin’s digital scarcity, a vision envisioned by its pseudonymous creator, Satoshi Nakamoto, who set an absolute cap of 21 million Bitcoins at the launch of this first cryptocurrency in 2009.
Currently, over 19.6 million Bitcoins have been circulated, representing the majority of Bitcoins that will ever be created. Halvings are scheduled to occur every four years and are expected to continue until the mid-22nd century. These events not only influence the pace at which new Bitcoins are generated but also the economic viability of mining for smaller or less resourceful operations. Despite these challenges, the network continues to operate efficiently, securing transactions and preventing fraud through the solving of complex mathematical problems by miners worldwide.
Pre-halving volatility and the fear of a price correction following this event in a typical “sell the news” scenario ultimately did not materialize. According to CoinGecko data, Bitcoin was trading at $63,976 at the creation of the decisive block, marking a slight increase of 1% over the previous 24 hours. Bitcoin regained the $66,000 mark yesterday, while Ethereum also recorded modest gains following Bitcoin’s fourth halving on Friday. After a period of intense volatility just before the event, both cryptocurrencies managed to stabilize. Bitcoin’s price increased by 1.6% in the last 24 hours, maintaining around $66,000, a level it had not reached in a week. This stability comes after a period of significant fluctuations, including a notable drop in Bitcoin’s price to $59,573 on a major exchange, followed by a rise above $65,000 a few hours later. Despite a record high of over $73,000 reached last month during a bullish rally celebrated, Bitcoin’s course has weakened, influenced by factors such as disappointing U.S. economic indicators and tensions in the Middle East.
Analysts at IntotheBlock, a blockchain analytics firm, state that Bitcoin is currently at a high support level, which could make it more resistant to downward pressure. “Bitcoin is currently positioned at the top of a key demand zone, with 1.66 million addresses having bought it at an average price of $64,800,” they wrote on Twitter. “This price point could potentially serve as a solid support level if the market underwent further downward pressure.”
Bitcoin ETFs on the spot market have reconnected with net inflows of funds after a period of net outflows just before the Bitcoin block reward halving. The Fidelity Wise Origin Bitcoin Fund stood out by recording the largest net inflow in one day, at $34.83 million according to SoSoValue data. Likewise, the ARK 21Shares Bitcoin ETF and the iShares Bitcoin Trust also saw substantial net inflows, of over $22.5 million and $19.65 million, respectively. On the other hand, the Grayscale Bitcoin Trust recorded the largest net outflow in one day, with nearly $35 million leaving the product. Despite these outflows, since their introduction to the market, U.S.-traded spot Bitcoin ETFs have accumulated a total net of $12.38 billion in inflows. Additionally, BlackRock’s IBIT ETF has experienced inflows for the 70th consecutive day, placing it among the top 10 ETFs with the longest series of daily inflows. IBIT’s market share among spot Bitcoin ETFs reached nearly 54% last week, underscoring its growing dominance in this segment.
The Fidelity Wise Origin Bitcoin Fund (FBTC) recently captured a record investment of $40 million thanks to two traditional American financial advisors, Legacy Wealth Management and United Capital Management of Kansas, each investing $20 million. This investment marks a record for a single placement in a Bitcoin fund and signals growing adoption among traditional investors. These figures, revealed in recent 13F filings with the SEC for the first quarter of 2024, show Legacy and United Capital managing over $359 million and $436 million in assets, respectively.
BlackRock’s spot Bitcoin ETF continues to experience remarkable growth, with net inflows of funds for the 70th consecutive day. If this trend persists for an additional 90 trading days, the fund will match the record of 160 days held by the JP Morgan Equity Premium Income ETF. Since it began tracking flows on January 12, BlackRock’s ETF has recorded more deposits than withdrawals every trading day, placing this fund among the top ten for the longest series of daily inflows since 2004. Despite recent net outflows observed in most Bitcoin ETFs, BlackRock’s ETF saw its assets under management increase to $18.15 billion, partly boosted by a 4% rise in Bitcoin over the weekend. This performance contrasts with a period of general uncertainty
for Bitcoin ETFs, exacerbated by the recent halving which halved the miners’ rewards. However, data shows that the two trading days surrounding the event each recorded inflows of around $60 million, indicating that the halving had no significant negative impact on investor sentiment.
This weekend, Bitcoin transaction fees reached a historic peak before falling back to levels comparable to those of last December. The increase in fees was primarily due to the launch of Runes, a protocol for the creation of fungible coins based on Bitcoin. According to data from Blockchain.com, the average Bitcoin transaction fee climbed to $127 on Friday. One user even paid nearly 8 BTC, or $510,000, to ensure the inclusion of their transaction in the first block of the new era of Bitcoin, contributing to this spike in fees. However, by Sunday, these fees had dropped to $34, a decrease of 74% from the previous day, reflecting a reduction in congestion on the Bitcoin network. This weekend, transaction fees accounted for up to 75% of total miner rewards, although this proportion dropped to 30% the next day. Despite this temporary spike, miners might wonder whether this increase in fees will be a recurring revenue source or merely an exceptional phenomenon in Bitcoin’s fifth epoch.
According to analysts, the impact of the recent Bitcoin halving on the dynamics of supply and demand in the market could take two to three months to fully manifest. Since this event occurred on Friday, April 19, the spot price of Bitcoin has recorded an increase of 8%. Analysts at QCP Capital predict that the effect of the supply constraint induced by the halving may not become apparent until 50 to 100 days after the event, a pattern observed during the previous three halvings. This period could offer investors the opportunity to increase their long positions in anticipation of a rise in prices. On the other hand, a report from Bitfinex notes that the reduction in the quantity of Bitcoin issued each day post-halving, estimated between $30 and $40 million, contrasts sharply with the average daily net inflows of $150 million from Bitcoin ETFs, creating a significant imbalance between supply and demand that could encourage further price appreciation. However, Bitfinex analysts have moderated their forecasts by highlighting that Bitcoin must also face geopolitical turbulence in the Middle East and elsewhere, which will test its viability and long-term valuation as “digital gold.” They also noted that recent net outflows from Bitcoin ETFs could signal a stabilization in demand for these products.
In response to U.S. sanctions reimposed on its oil industry after a six-month pause, Venezuela is accelerating its use of cryptocurrencies in oil trading. The state-owned oil company, PDVSA, plans to increase the use of digital currencies for its exports of crude oil and fuel, aiming to minimize the risk of sales revenues being frozen in foreign bank accounts. According to sources reported by Reuters, PDVSA has adapted many of its spot sale contracts to require a prepayment of half the value of each shipment in USDT, the stablecoin cryptocurrency, even during the period of suspended sanctions. This transition to cryptocurrency occurs in a context of growing political tension, exacerbated by the exclusion of opposition candidate Maria Corina Machado from the presidential elections by the government of Nicolás Maduro. Moreover, PDVSA now requires any new client conducting oil transactions to hold cryptocurrencies in a digital wallet. Tether, the blockchain platform underlying USDT, has nevertheless stated that it complies with the guidelines of the Office of Foreign Assets Control (OFAC) by blocking addresses identified by authorities as belonging to sanctioned individuals, having already frozen more than $1 billion across 1,426 USDT addresses, according to Dune Analytics.
The U.S. SEC has recently postponed its decision regarding the proposals for spot Ethereum exchange-traded funds (ETFs) by Grayscale Investments and Franklin Templeton. Both financial giants, along with several other fund managers, are waiting for SEC approval to launch their investment vehicles on American exchanges. While the SEC approved 11 spot Bitcoin ETFs in January, allowing their trading after a decade of refusal and marking a massive success with significant inflows, the approval of an Ethereum ETF appears uncertain. Industry analysts doubt an approval will be granted by the May deadline, with JP Morgan estimating the chances at “no more than 50%.” If no Ethereum ETF is approved by then, the applicants are considering taking legal action against the regulator.
The cryptocurrency exchange platform Binance is facing legal action in Canada, accused of violating local securities laws. According to a certification motion published by the Superior Court of Justice of Ontario on April 19, Binance allegedly sold cryptocurrency derivatives to individual investors without the required registrations. The plaintiffs, represented by Christopher Lochan and Jeremy Leeder, argue that these sales violate the Ontario Securities Act (OSA) as well as federal legislation, and they are seeking damages as well as the cancellation of the illegal derivatives transactions. This legal action comes as Binance had announced in June 2021 its intention to cease its operations in Ontario following a warning
from the Ontario Securities Commission (OSC). However, despite announcing its departure from Canada in May 2023, Binance continues to be under investigation by local authorities, and the OSC is continuing its investigations. Binance overwhelmingly dominates the derivatives market among centralized exchanges, handling 58% of the total spot trading volumes as of March 2024. The plea highlights that the majority of Canadian crypto owners hold at least $5,000 in the market, underscoring the importance of individual investors in this domain.
Technically speaking, Bitcoin’s simple moving average over 200 days, a key indicator for tracking the long-term trend of the cryptocurrency, is on track to surpass its previous peak of $49,452 reached in February 2022. This development is significant, as historical data indicates that the most intense phases of Bitcoin’s bull cycle generally occur after this average surpasses its previous highs. In October, Bitcoin’s price crossed this average, reaching record highs above $73,000 last month. Currently, the 200-day average is at $47,909, indicating strong bullish momentum and suggesting that it could soon surpass its previous peak.
Historically, significant surges have followed new highs of this average after halvings. For example, after the average reached new highs in December 2016, five months after the second halving, Bitcoin increased by over 2000% in 12 months. However, it is always important to note that past performance does not guarantee future results.
The presented information is as of April 23rd, 2024, unless otherwise indicated and is provided for information purposes only. The information comes from sources that we believe are reliable, but not guaranteed. This statement does not provide financial, legal or tax advice. Rivemont Investments are not responsible for any errors or omissions in the information or for any loss or damage suffered.
