With Bitcoin reaching heights unseen lately, there seem to be two paths forward before the next BTC halving. We look at both.
Bitcoin is up almost 40% in the last month, and is hitting highs not seen in two years. The move comes less than two months before the next Bitcoin halving, when the reward for mining a bitcoin is cut in half. With the April 2024 halving on minds, predictions regarding the price before the event abound. At the same time, the psychological boundary of $60,000 per bitcoin is coming fast. It will be no surprise when that price is reached. The only question is whether the notoriously volatile cryptocurrency will keep charging upward, or are we in for a roller coaster ride that gets us there?
Spot ETFs fueling the rise
Trading volumes for Bitcoin spot ETFs hit a record on February 26 of $2.4 billion. This inflow, along with over $500 million moving into futures ETFs on the same day, is increasing demand. Mining is able to support roughly 10% of the daily demand from the spot ETFs. The resultant demand pressure seems to point to a bullish scenario through to the halving at least. As a result, claims that BTC is headed above $100,000 (or $250,000 or more) are circulating. If that’s the case, then indeed, Bitcoin is on an escalator to $60,000 and more.
The rollercoaster scenario
Despite the strong ETF demand story, Bitcoin is not isolated from external influences. Mid-February saw a stumble as the release of U.S. inflation data showed the economy cooling off at a slower rate than expected. Many investment classes absorbed the information with a dip in prices, including major cryptocurrencies such as Bitcoin. News flow can still dent or even cause a short term drop. Unless demand drops, though, the move is expected to be upward, thus the rollercoaster and not submarine.
Mining difficulty at record highs
One issue that not connected to BTC prices directly but of note is the pressure on mining at the moment. Before the halving, mining difficulty could rise as much as another 25% due to increased number crunching per 10-minute coining, making it more difficult for less efficient miners to make money. Under normal circumstances, the less efficient miners would drop off until times when it does not cost so much to produce one BTC. Now, with the crypto at highs, even a massive blow to miners (such as a sub-Carrington-event solar storm) that would take some minors offline would only make it easier for others to fill their places. The interest in mining is simply too high at the moment despite the difficulty.
