As the fourth Bitcoin halving approaches, a recent report from Glassnode sheds light on the remarkable tightening of Bitcoin (BTC) supply, outlining key metrics and patterns that suggest a potential surge in investor interest and accumulation. The report explores the dynamics of supply, investor behavior, and capital flows leading up to the 2024 Bitcoin halving.
Anticipation of the 2024 Bitcoin Halving
The Bitcoin halving, occurring approximately every 210,000 blocks, reduces the rate of new coin issuance by 50%. While the exact date of the fourth halving remains uncertain, Glassnode’s best estimate places it 158 days away, expected on April 23, 2024. This event is of great significance to both the cryptocurrency itself and its investors. Historically, Bitcoin miners have distributed a significant portion of their earnings to cover capital and operational expenses.
The report notes that the yearly high of USD value issued to miners via newly minted supply is currently around $1 billion, creating a notable headwind for capital inflow. Post-2024 halving, this is expected to be halved to $500 million per month, comparable to the distribution pressure observed around the FTX lows one year ago. Investors are particularly intrigued by the potential impact of the halving on Bitcoin’s market performance, considering the impressive price appreciation observed in the 365 days following previous halving events.
Supply, Storage, and Capital Flows
Glassnode’s comprehensive analysis is structured around three key stages, each offering valuable insights into the current state of the Bitcoin market. The first stage involves assessing the ‘Available and Active’ Supply, where the report estimates the volume of BTC actively circulating and available for trade.
Notable metrics in this category include Short-Term Holder Supply and various indicators of ‘hot supply,’ collectively representing 5% to 10% of the circulating supply. Moving on to the second stage, Glassnode delves into Measuring Rates of ‘Supply Storage and Saving.’ This phase reveals a decline in available supply, signaling a notable migration of coins away from exchanges and active trading, with a clear trend towards cold storage and long-term investor wallets.
Finally, in the third stage, the analysis focuses on Analyzing the Impact of Capital Flows on Market Valuation. Glassnode utilizes The Realized Cap as a proxy for understanding capital inflows, outflows, and the rotation of assets, offering valuable insights into investor behavior across different market conditions. This three-stage approach provides a comprehensive perspective on Bitcoin’s supply dynamics and the evolving landscape of investor activity.
Historic Lows in Available Supply and Increased Accumulation
The report highlights that available BTC supply is at historical lows on a relative basis, with Short-Term Holder Supply and Exchange Balances collectively representing 23.8% of the circulating supply, an all-time low. Furthermore, rates of ‘supply storage’ by investors are significantly higher than issuance rates in the pre-halving environment, with accumulation patterns exceeding new issuance by factors ranging from 1.1x to almost 2.5x.
As the fourth halving approaches, Glassnode’s report suggests a meaningful tightening of Bitcoin supply, with notable confluence between various metrics indicating historical lows in available supply. These trends, coupled with increased rates of supply storage, could have significant implications for investors, adding to the anticipation surrounding the upcoming halving event. Investors are advised to carefully monitor these supply dynamics as they navigate the evolving landscape of the cryptocurrency market.
