Coinbase: In-depth analysis of Bitcoin's trend after this halving

Iti9

As the fourth Bitcoin halving approaches, we believe that caution should be exercised in interpreting studies of previous cycles due to the small sample size, making it difficult to generalize patterns to the upcoming future.

· The introduction of the U.S. Bitcoin ETF has also reshaped Bitcoin's market dynamics by establishing new anchors for BTC demand, making this cycle unique.

· We believe that the current price trend is just the beginning of a long-term bull market, and further upward momentum is needed to balance the supply-demand dynamics.

We are just over a month away from Bitcoin's fourth halving. Like all previous halvings, it will halve the issuance reward of Bitcoin miners, this time reducing it from 6.25 BTC per block to 3.125 BTC. While studying past halving cycles can provide some reference for the potential price trend of Bitcoin, we believe that the sample size of three events is too small and may not provide enough data support to structure a clear pattern or make definitive predictions about the impact of halving.

Furthermore, we believe that with the emergence of the U.S. Bitcoin ETF, the market dynamics of Bitcoin have fundamentally changed. In just two months, its net inflows have reached billions of dollars, irreversibly altering the landscape. Now, major institutional participants can invest through these instruments, and Bitcoin's response to this halving may not necessarily be reflected in the performance of the previous three cycles. We believe that understanding the current technical supply-demand situation is more important as it can help us better understand Bitcoin's potential.

Indeed, while the new Bitcoin supply restriction is an important consideration, it is only one of many factors. Since early 2020, tradable Bitcoin (the difference between circulating and illiquid supply) has been declining, a significant change compared to previous cycles. However, recent data suggests that active BTC supply (Bitcoin that has moved within the past 3 months) has increased significantly by 1.3 million since the beginning of Q4 '23, while only about 150,000 BTC have been newly mined during this period. Although the market is more capable of absorbing this supply than in the past, we still believe that a cautious approach is warranted, avoiding oversimplifying the complex interactions between these market dynamics.

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