Bitcoin ETFs: Softening BTC Price Retracement Ahead of Halving

Bitcoin’s halving event occurs every four years or after 210,000 blocks, and it is typically accompanied by a price retracement. Market observers are wondering if this year’s retracement will be less severe due to the presence of spot Bitcoin exchange-traded funds (ETFs). These ETFs have the potential to attract institutional investment into BTC, which could soften the impact of the halving. The next halving is expected to take place in April 2024, and it will be the fourth halving in Bitcoin’s history. Halvings reduce the supply of new BTC, making it more scarce.

There are five stages to the halving process. The first stage is the pre-halving downside phase, where investors anticipate the event and prices bearishly. The second stage is the pre-halving rally, where short-term investors increase prices to benefit from the halving hype. The current belief is that Bitcoin has entered the third stage, which is the pre-halving retracement. During this phase, prices decrease as investors anticipate sell pressure and exit their positions. Investors are hopeful that Bitcoin ETFs will play a crucial role in mitigating this retracement.

The fourth stage is reaccumulation, which begins after the halving and can last up to five months. During this stage, hype dissipates, and many investors leave their positions due to stagnant prices. The fifth stage is the parabolic uptrend, where Bitcoin can recover from the third and fourth stages and reach a new all-time high.

Bitcoin ETFs are expected to have an impact on the pre-halving retracement. The US Securities and Exchange Commission approved 11 Bitcoin ETFs for listing and trading on traditional exchanges, allowing traditional investors to include Bitcoin in their portfolios. Data shows that the demand for Bitcoin ETFs is significant, with over 1 million Bitcoin in assets under management and $10 billion in trading volume. This increased demand could act as a hedge against falling prices during the retracement.

The connection between Bitcoin ETFs and the halving will be most evident during the third and fourth stages. These stages typically see falling Bitcoin prices as investors exit their positions. Miners also sell their Bitcoin holdings before their rewards are cut in half. The influx of institutional investors through ETFs could counteract the falling prices. This would create a stronger base for the parabolic uptrend and potentially result in even higher all-time highs.

Some experts are skeptical about the impact of Bitcoin ETFs during the halving. They argue that if the demand for Bitcoin ETFs does not continue positively, they could contribute to the selling pressure instead of balancing it out. JPMorgan predicts a bearish scenario where Bitcoin could fall as low as $42,000 after the halving. Grayscale Investments, for example, has experienced significant outflows from its Bitcoin ETF, suggesting decreasing investor interest.

While it is impossible to be certain about the impact of Bitcoin ETFs during the halving, the bearish scenario seems unlikely given the performance of these ETFs. Time will tell to what extent ETFs will affect the halving stages, if at all.