30th April 2023 > > The halving.

tl;dr

Contrarians are eyeing up the halving in 2024 as potentially another one of the plentiful opportunities that can be spotted by deliberately failing to adhere to mainstream thinking.

Market Snap (at time of writing)

(*) Since Friday’s open.

Market Wrap

The 7-day moving average of BTC transactions has just recorded a new high of 426,000. This is in part due to the increasing popularity of ordinals (see CCC 19th, 20th & 21st February 2023) for which yesterday saw a new record number of inscriptions of 223,000. There are now more than 2.4mm ordinals and increasingly they look like becoming a permanent fixture of the BTC landscape.

More uses, more users, more adoption. This can only be positive for future price action.

Curious Cryptos’ Commentary – The halving

The next halving is expected on April 27th, 2024, at which point the reward paid to the miner who successfully adds the next block to the BTC blockchain reduces from 6.25 BTC to 3.125 BTC.

Economics 1.0 says that if supply is reduced, and demand stays the same, the price goes up.

Though that model is a gross simplification of the real-world, it is particularly accurate when applied to commodities. Even Gary Gensler, Chair of the SEC (Securities and Exchange Commission) believes BTC to be a commodity.

Fiat money is also a commodity.

The demand for fiat is influenced by a multitude of different factors.

The supply of fiat is determined by just one entity – the Central Bank of that fiat and by extension the relevant government, for one of the greatest cons ever perpetrated on us simple folk is the claim by the technocratic and bureaucratic elite that Central Banks are truly independent. Never have been, never will be.

Which happens to explain the hugely damaging mistakes being made around tax policy, but we shall leave that discussion for another day.

…

The real-world experience of previous halvings certainly supports Economics 1.0.

In a very recent research report, Berenberg made this comment:

“If history is any guide, then we believe the price of Bitcoin could rally ahead of and following this much-anticipated halving …”

I suspect they are right on both points – that there is a rally, and that it happens ahead of the event.

With greater awareness, and more sophisticated investors involved in BTC, positive price action due to the halving will be brought forward in time. And this is a theme that many more people will start pushing as we get closer to the date of halving.

But I think we should all bear in mind one specific point.

The reduction in supply for each halving is (by definition) half the reduction in supply of the previous halving.

At some point – and this may not be the case for 2024 – this change in supply effectively becomes meaningless.

Buying the fact and selling the rumour for the 2024 halving is starting to feel like a real contrarian’s trade.