Bitcoin Halving Is Not An Event; “There Just Ain’t Enough BTC To Satisfy New Investor Demand”


The equities market finished April with a 12% gain, having its best monthly performance since 1991 despite the ruptured economy.

“Soaring jobless claims, empty restaurants, and a falling count for active oil rigs show the breadth and depth of the blow to the economy,” said Bloomberg economists Eliza Winger and Tom Orlik.

Amidst this, the Federal Reserve continues to power its money printer. The Fed has dramatically stepped up its effort to prevent a coronavirus depression as it promises to start buying corporate bonds and ETFs in early May. The US central bank later added junk bonds and junk bond ETFs to this list as well.

This meanwhile is helping gold which hovers around $1,700. “The massive monetary support we are witnessing at the movement is helping gold,” Commerzbank analyst Eugen Weinberg said.

But the monetary stimulus is not only helping the precious metal but also the digital currency.

Bitcoin outperformed other assets by finishing April up 34%. The leading digital asset has completely retraced the March 12 lows and is currently trading under $9,000.

“Record monetary and fiscal stimulus is creating the perfect macro backdrop for this inflation-protected, non-sovereign digital asset class,” said Jeff Dorman, Chief Investment Officer at Arca.

Bitcoin’s correlation with the S&P 500 which recently surged to its peak is also starting to subsidize. Moreover, the Chinese Yuan is falling against the dollar once again, which “historically had a much higher negative correlation to Bitcoin.”

Amount of Newly Issued Bitcoin Minuscule to Investment Dollar

Bitcoin has some strong tailwinds ahead of halving, which is less than a week away now. Google searches for the keyword “Bitcoin halving” is already at a record high and continues to climb upwards.

Could the rally that started last month continue into May and see us reaching the all-time high? According to Arca, “the halving is not an event at all.”

Bitcoin has a fixed supply of 21 million coins which is a well-known fact. As such, the supply curve is vertical — perfectly inelastic because it doesn’t change based on demand or price.

This means, “price can only change due to a shift in the demand curve.”

Income, trends and tastes, expectations, price of related goods, and the size and composition of the population are the attributes that cause a shift in the demand curve.

Although these factors contribute to the future growth in bitcoin adoption and as such price, they aren’t specific to halving.

But the price of bitcoin is still expected to move higher for the very reason that “the amount of newly issued Bitcoin is minuscule relative to the number of investment dollars.”

Unlike the corporate bond and equity markets which reached $260 billion in March and then added another $25 billion in April 2020, newly minted bitcoin will fall from 1800 BTC per day to 900 BTC per day post halving.

At the current price, this equates to about $240 million per month of new bitcoin, this is about 12 times less than the new equity offerings and 500 to 1000x less than the corporate bonds offerings.

“There just ain’t enough Bitcoin to satisfy new investor demand,” Dorman said.

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