Goldman Warns Against Predicting Bitcoin Prices from Halving Cycles


In exactly two days, Bitcoin will undergo its fourth mining reward halving.

According to Goldman, economic variables likely had a role in the past bull runs in Bitcoin, rather than the mining-reward halving on its own.

Bitcoin’s mining rewards will be halved for the fourth time in five days. To cut the rate of new supply in half, the quadrennial event will lower the amount of bitcoins emitted per block from 6.25 BTC to 3.125 BTC. The crypto community is optimistic that the next halving will be even bigger than the ones that came before it, leading to tremendous multi-month rallies in BTC.

Nevertheless, the legendary investment firm Goldman Sachs warned its customers against making too much of previous halving cycles.

“The time it took for Bitcoin’s price to reach all-time highs varies greatly, but historically, it has appreciated following each of the previous three halvings. On April 12, the Fixed Income, Currencies, and Commodities (FICC) and Equities team of Goldman Sachs warned clients not to “extrapolate the prior cycles and the effect of halves” due to the current macroeconomic climate.

A look at the graph reveals how bitcoin fared after the 2012, 2016, and 2020 halving dates. The most critical difference between then and now is the macroeconomic situation, which is characterized by rising inflation and interest rates. According to a study from last year by CoinDesk, the money supply of the European Central Bank, the Bank of Japan, the People’s Bank of China, and the United States Federal Reserve all saw fast growth over that time. The developed world’s interest rates remained at or around zero for an extended period of time, which encouraged investors to take risks in the financial markets, particularly in cryptocurrency.

It is not the case at this moment: Due to persistent inflation and a robust economy, markets have lately priced out the possibility of interest rate decreases this year in the world’s biggest economy, the United States, which has rates over 5%.

Inflows into U.S.-based spot exchange-traded funds (ETFs) have contributed to a 50% rally in the bitcoin price this year, which reached record highs long before the halving. In only six months, the price has climbed over 130%. There is a demand-supply mismatch, according to Bloomberg, since eleven spot-based ETFs have accumulated $59.2 billion in AUM since they went live three months ago.

Therefore, according to these experts, the bulk of the often seen increase after a half has already occurred, which might lead to a sell-the-fact reversal after the halving on April 20.

Goldman claims that the halving of Bitcoin’s supply serves as a “psychological reminder to investors of BTC’s finite supply,” and that the use of exchange-traded funds (ETFs) will determine the medium-term prospects.

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