New research anticipates increased trading volumes, higher valuations, and improved investment sentiment for bitcoin ahead of the programmatic halving event, set to take place this week.
Binance’s survey of more than 2,000 Australian cryptocurrency investors found over 50 per cent expect the price of bitcoin to increase as a direct result of the halving.
Just under half said they are keen to increase their bitcoin holdings ahead of the halving and some 80 per cent said they plan to increase their bitcoin holdings “in the very near future”.
“As we grapple with inflationary pressures and rising rates, the halving is an important inbuilt inflationary hedge,” said Ben Rose, general manager of Binance Australia and New Zealand.
With the halving event, which takes place every 210,000 blocks or approximately every four years, the reward for bitcoin mining is cut by 50 per cent as an in-built safety guard for the asset to maintain scarcity, thus presenting a hedge to counteract inflation.
“With only 21 million coins to ever exist, the asset mimics the scarcity of precious commodities, like gold. This is capturing the attention of institutional investors, who are increasingly recognising the crypto can play as part of a diversified investment portfolio,” Rose added.
Last week, crypto and digital-asset focused asset manager Magnet Capital observed that huge inflows of institutional support, following the approval of bitcoin ETFs by the US Securities and Exchange Commission in January, has bolstered market demand dynamics and already impacted the spot price of bitcoin in 2024.
“Whilst we anticipate the economic changes to bitcoin to result in similar supply side pressures as previous halving events, the impacts of the demand side changes from the ETF in the months prior to the halving are more significant,” Magnet Capital director Ben Celermajer told InvestorDaily.
“As the market matures and more institutional investors enter the space, the dynamics around halving events could evolve. Institutional investors, with their substantial capital and strategic investments, may respond differently to halving events than retail investors have historically, potentially moderating the volatility historically associated with these milestones.”
Binance’s survey found similar results, noting “unprecedented US capital market participation demand” driven by the launch of spot bitcoin ETFs, which have seen the most successful ETF debuts on record.
Binance said it has experienced a 55 per cent increase in total trading volume and a 41 per cent increase in new user registrations over the last quarter, since the approval of the ETFs.
“There is no doubt we are at a pivotal moment for bitcoin,” Rose said.
“The launch of ETFs and growing institutional participation has heightened interest from mainstream investors and positively impacted demand for cryptocurrency.”
Notably, the asset class has also seen record high prices for the first time, predating the halving event, having exceeded US$73,000 in February.
As at 15 April, it stands at just over US$65,630 and has declined 7 per cent in the last five days.
Still, just over 70 per cent of investors remain bullish on the price, expecting it to continue to rise over the next six months, according to Binance’s findings.
In previous years, bitcoin saw substantial price increases following the 2012 and 2016 halvings, rising by 284 per cent and 559 per cent, respectively.
Ramped up regulation
Binance’s Rose highlighted that, given this increased attention on cryptocurrency from Australian investors, it remains “critical” to see more formal regulatory guidelines on the asset class.
Last year, the difficulties posed by enforcing crypto activity prompted Treasury to conduct a consultation, which concluded in December, into introducing a regulatory framework for the asset.
The Regulating Digital Asset Platforms consultation sought to introduce a regulatory framework to address consumer harms in the crypto ecosystem while supporting innovation.
The framework will apply to digital asset platforms that present similar risks to entities that operate in the traditional financial system, and is proposed to leverage the Australian financial services framework to regulate digital asset platforms to ensure consistent oversight and safeguards for consumers.
“With Australian investors – from retail to institutional – increasingly turning attention to crypto, it is becoming ever more critical that Australia not delay in introducing a formal regulatory framework that both protects consumers and fosters innovation. We need to remain competitive on the global stage,” Rose said.
“We have not seen market conditions like this ahead of a halving event before, and this is driving a lot of excitement amongst market participants, with more than 70 percent of our Australian users eager to see the impacts.
“With sky-high demand, record-breaking prices, and a bullish investor outlook, it is a pretty exciting moment to be in crypto.”
