Bitcoin Halving May Improve Prices, But Other Factors Apply: Coinbase

Midway through April is when the next halving occurrence is anticipated. Prior to and following prior block reward halvings, Bitcoin had a rally. Coinbase stated that macro issues and other non-crypto aspects are significant as well.

According to a study paper released on Wednesday by Coinbase (COIN), investors should exercise caution when it comes to the assumption that bitcoin's (BTC) recent good performance would persist beyond the impending halving, which will decrease the quantity of new BTC. However, historical evidence suggests otherwise.

According to Coinbase, the leading cryptocurrency climbed by an average of 61% in the six months leading up to previous halvings and by an average of 348% in the six months following.

According to the paper, there is limited historical information regarding the potential positive influence of the halving on bitcoin's performance, which makes it fairly speculative. Reward reductions for mining are halved every four years. On April 15th, there will probably be another event.

The price of Bitcoin is impacted by various factors, including macroeconomic conditions, and "Bitcoin doesn't operate in a vacuum," according to Coinbase. "In response to the COVID-19 pandemic, there was an environment with extraordinarily loose monetary policy and historically strong fiscal stimulus," the paper said, explaining why bitcoin performed better following its previous halving in May 2020.

The paper also claimed that the recent surge in the largest cryptocurrency in the world was driven less by anticipation of the halving and more by fervor about the possibility of spot bitcoin ETFs.

According to Coinbase, who added, "long-term holders should be less likely than short-term holders to view halving as an opportunity to sell into strength," another data point worth examining when looking at the approaching halves is the total supply of bitcoin held by long-term holders. By historical standards, the amount of bitcoin retained by long-term investors is relatively high right now.

According to the analysis, risk assets are likely to benefit from the U.S. Federal Reserve's decision to start reducing interest rates and tapering its quantitative tightening program in May.

stay turned for development