Bitcoin Halving Effect on Asset’s Behavior Still Unclear: Coinbase

A new report from America’s largest cryptocurrency exchange Coinbase reveals that the impact of Bitcoin halving events on the asset’s performance remains unclear as many external factors play important roles in market behavior.

While the halving is viewed positively as it is believed to enhance the potential scarcity of BTC and support the supply and demand dynamics, getting a clear picture of the market reaction will require deciphering the effects of movements in the US dollar, interest rates and global liquidity.

The blurred effect of the BTC halving

Bitcoin halvings happen every four years or every 210,000 blocks. During the event, the block rewards for bitcoin mining are reduced by 50%. The first halving took place in 2012, and the next halving, the fourth, is expected to happen between April and May 2024. The upcoming halving will reduce BTC block rewards from 6.25 BTC to 3.125 BTC per block.

David DeYoung, Head of Institutional Research at Coinbase, to explain In the report that with only three halving events, evidence of market reaction remains limited, as they all occurred alongside some significant monetary and financial developments.

In 2012, the Federal Reserve began purchasing mortgage-backed securities and long-term Treasury notes for the third round of quantitative easing (QE3). During the second half of 2016, Brexit triggered financial concerns in the European Union and the United Kingdom, which led to an increase in bitcoin purchases. When the third halving occurred in 2020, central banks and governments responded to the COVID-19 pandemic with “unprecedented levels of stimulus,” which sent a surge in global liquidity.

Canceling Bitcoin price action from movements in such factors helps clarify the situation somewhat. However, outside of the third halving, the evidence that these halving events support Bitcoin price action is not entirely clear.”

Get a clear picture

Duong further emphasized that removing the influence of global liquidity on BTC’s price behavior would reveal a clear picture of the asset’s performance within different economies.

As the next halving approaches, Duong said it is important to note that the current surge in global liquidity will mask the net impact on bitcoin price behavior, as the cryptocurrency market has been tracking global liquidity movements since the unfavorable market events that occurred in May. – June 2022.

“We believe it is possible that the next Bitcoin halving in the second quarter of 24 will have a positive impact on the performance of the token. However, the limited supporting evidence makes this relationship still somewhat speculative, in our view,” added Coinbase’s head of research.