✨How Bitcoin ETFs Will Cushion BTC's Price Drop Ahead of the Halving💰
Bitcoin's halving, which occurs approximately every 4 years, often comes with a price dip. This time around, there's a buzz about whether the introduction of spot Bitcoin exchange-traded funds (ETFs) could ease this drop, compared to previous halvings
Scheduled for 20 April, the 2024 Bitcoin halving marks the fourth in its history. These halvings are designed to decrease the supply of new BTC, ensuring its scarcity.
Here's a simplified breakdown of the 5 stages of a halving:
1. Pre-halving downside phase: Investors anticipate the event, causing bearish price movements.
2. Pre-halving rally: Prices surge as short-term investors try to capitalize on the hype.
3. Pre-halving retracement: Prices start to dip again as investors anticipate sell pressure.
4. Reaccumulation: After the halving, prices stabilize as hype dies down, and investors exit their positions.
5. Parabolic uptrend: Bitcoin prices soar to new all-time highs.
Now, let's focus on the third stage, the pre-halving retracement, where Bitcoin ETFs could play a vital role.
Since the 11 Bitcoin ETFs were approved, there has been a significant institutional demand for them. On March 4, global Bitcoin exchange-traded products exceeded 1 million $BTC in AUM. Additionally, on March 5, these products hit a record $10 billion in trading volume, signaling growing interest
Many believe that this surge in demand for Bitcoin ETFs could act as a hedge against falling prices during the pre-halving retracement. How exactly?
Well, during the 3rd & 4th stages of a halving, we typically see declining $BTC prices as investors exit their positions. This can lead to a decrease in demand. However, the Bitcoin ETFs could counter this trend by attracting institutional investors who are looking to diversify their portfolios
NB: If demand for the ETFs wanes, they could increase the selling pressure instead of reducing it.
Only time will tell whether the ETFs will be a game-changer during the halving stages
