Post-Halving Demand to be 5X Greater Than Supply

Bitcoin’s recent halving has created a market environment where demand could significantly outpace supply, potentially by a factor of five, according to analysts at Bitfinex.

The halving, which took place on Saturday, reduced the reward for mining each Bitcoin block from 6.25 BTC to 3.125 BTC, effectively cutting the daily supply in half. Bitfinex analysts estimate that this drop in mining rewards means that the notional value of newly issued coins could fall to approximately $30 million daily, a substantial reduction from previous levels.

“With the daily issuance rate declining post-halving, we estimate that the new supply added to the market would range from $40 to $50 million in USD terms. This amount could further decline to $30 million per day, taking into account both active and dormant supply, as well as miner sales, especially as smaller mining operations shut down,” Bitfinex analysts stated.

In contrast, the daily demand from spot Bitcoin ETFs significantly exceeds this reduced supply. According to Bitfinex, these ETFs have an average daily net inflow of over $150 million, though recent trends show a slowdown and occasional net-negative inflows.

Data from Glassnode indicates that since the halving, the daily issuance of new coins has dropped to 450 BTC (approximately $30 million) from the pre-halving average of around 900 BTC, highlighting the impact of the halving on supply.

The reduced daily issuance has contributed to the supply squeeze, with nearly a dozen spot-based ETFs in the U.S. facilitating investor exposure to Bitcoin without direct ownership. Bitfinex expects the average daily inflows into these ETFs to remain constant in the coming months.

The selling pressure from miners might also ease following the halving. In the months leading up to the halving, miners liquidated some of their coin inventory to finance equipment upgrades. Glassnode data shows that miner-held coins fell by over 18,000 BTC to 1.82 million BTC in the six months before the halving.

Additionally, Bitfinex noted an increasing trend of investors taking direct custody of their coins, which could further tighten the supply. “Current on-chain data indicates that Bitcoin exchange outflows are reaching peaks not seen since January 2023, suggesting that many investors are moving their holdings to cold storage in anticipation of price increases,” the analysts commented.

Despite the anticipated price correction post-halving, Bitcoin’s price has risen over 5% to $66,660, with the broader CoinDesk 20 Index up nearly 7%. This defies expectations and indicates robust market conditions, with strong demand absorbing any selling pressure from long-term holders.