Bitcoin’s on-chain metrics have received a “decidedly positive” assessment following the recent halving event, according to a report by Bitfinex. The report highlights that BTC exchange outflows have reached their highest levels since January 2023, indicating a strong absorption of selling pressure in the market. This positive trend has been supported by the approval of spot Bitcoin exchange-traded funds (ETFs) by the SEC in the US earlier this year. These ETFs have not only generated significant inflows of around $60 billion in the first quarter but have also increased market liquidity and attracted new demand for BTC.
The recent halving, which occurred in April 2024, has further tightened the supply of new Bitcoin coming from mining rewards. Historically, this has led to substantial price increases, as seen in the previous halving event in 2020. Although miners have experienced a drop in revenue post-halving, the market typically recovers as prices rise and larger mining operations scale up.
Notably, miners have been observed sending an average of about 374 BTC to spot exchanges daily over the past month, a decrease from the 1,300 BTC sent in February. This suggests that miners sold their Bitcoin reserves before the halving, spreading the potential selling pressure over a longer period and avoiding a sharp market drop.
The growing institutional investor demand and the acceptance of Bitcoin ETFs are driving the evolving dynamics of crypto assets. These ETFs are expected to have a significant impact on market volatility due to their ability to attract large inflows and outflows. Additionally, Bitcoin’s limited supply, with a maximum of 21 million coins to be reached by 2140, sets it apart from fiat currencies subject to inflationary government policies. Despite the halving, the daily new supply of Bitcoin is estimated to add $40-50 million in dollar-notional terms to the market, which is overshadowed by the average daily net inflows of over $150 million from spot Bitcoin ETFs.
The approval of spot Bitcoin ETFs by the SEC has opened up new avenues of demand, similar to the introduction of gold ETFs in 2004. Two months after the launch of Bitcoin ETFs, the net flow into these funds remains positive, with demand surpassing the creation of new coins by over 150,000 BTC. This trend is expected to continue in the coming months.