Grayscale: 2024 Bitcoin Halving ‘Different’ as ETFs, Ordinals Reshape Market Structure

Digital asset manager Grayscale predicts that the 2024 Bitcoin halving will play out differently than the past three, in a new report that highlights the market impact of U.S. spot Bitcoin ETFs.

In a report titled “2024 Halving: This Time It’s Actually Different,” released Friday, Grayscale analysts point to Bitcoin ETFs providing a “new, steady demand source” that could counterbalance sell pressure from mining issuance.

While the report notes that Bitcoin’s price has historically gone up after each halving, it also cautions that other cryptocurrencies with halving mechanisms, such as Litecoin, have not seen a similar price appreciation post-halving. The report’s authors also highlight that post-halving Bitcoin price increases have also coincided with “significant macroeconomic events” such as the European debt crisis and the COVID-19 pandemic.

The report points to “evidence that miners have long been preparing for the financial repercussions of the halving,” such as fundraising and selling holdings onchain in late 2023. This, they suggest, means that miners are “well-positioned” ahead of the halving—and even if some miners exit the market, the hashrate decrease will lead to an adjustment in mining difficulty, ensuring the network remains stable.

The report’s authors also flag the impact of Bitcoin ordinals inscriptions and ETF flows on Bitcoin’s market structure. The former, they argue, serves as a bellwether for how miners will be incentivized to secure the network as block rewards decline, with ordinal activity representing “a new path toward sustaining network security through increased transaction fees.”

Bitcoin ETFs, meanwhile, saw inflows of $1.5 billion in just a fortnight after their launch, “absorbing nearly the equivalent of three months’ worth of potential post-halving sell pressure.” While Grayscale’s analysts don’t expect that level of “pent up demand” to be sustained, they note that a steady state of net inflows to ETFs could counterbalance sell pressure from mining issuance, while higher levels of inflows around $10 million a day could even “mirror the effects of another halving.”

One Bitcoin ETF that hasn’t enjoyed net inflows is Grayscale’s own GBTC, which since its conversion into a spot Bitcoin ETF saw billions of dollars in outflows as holders took the opportunity to cash out. In recent weeks those outflows appear to have slowed, though funds continue to flow from GBTC into rival Bitcoin ETFs.

Edited by Stacy Elliott.