While Donald Trump‘s presidential election victory in the United States has certainly played a role in Bitcoin’s recent price surge, experts argue that this is not the primary driver. Jesse Myers, co-founder of Onramp Bitcoin, suggests that the real narrative behind Bitcoin’s significant increase lies elsewhere.
Post-Halving Impact
On November 11, Myers highlighted on X that we are now over six months past the latest Bitcoin halving event, which occurred in April. This halving reduced block rewards from 6.25 BTC to 3.125 BTC, effectively making Bitcoin scarcer as it becomes more challenging to mine. Myers explained that this has led to a supply shock, with current supply levels insufficient to meet the soaring demand. This imbalance necessitates a price increase to restore supply-demand equilibrium.
Exacerbated by ETFs
The introduction of Bitcoin exchange-traded funds (ETFs) in January has further amplified this demand. On a single day, November 11, U.S. Bitcoin ETFs witnessed massive inflows, purchasing approximately 13,940 BTC, in stark contrast to the mere 450 BTC mined that day. Myers posits that the only resolution to this supply-demand mismatch is a price increase, which could potentially spiral into mania and subsequent market bubbles—a pattern observed in previous post-halving periods.
Myers noted that every four years, following a halving, the market has experienced a reliable, albeit predictable, bubble. This cyclical trend has been consistent with the halvings in 2012, 2016, and 2020, and now appears to be repeating. He anticipates that prices will climb significantly higher.
Supporting Myers’ view, onchain analyst James Check draws a comparison between Bitcoin’s market cap and that of gold. Despite gold adding approximately $6 trillion in market cap over the past year, it continues to see hundreds of billions in new and recycled supply entering the market. In contrast, Bitcoin, with a market cap of $1.6 trillion, remains “absolutely scarce,” with a committed base of holders. Check believes that Bitcoin’s value will only ascend further.
On November 12, American financier Anthony Scaramucci echoed these sentiments, suggesting that it is still early for investors to get into Bitcoin. He expressed confidence that the U.S. would establish a strategic Bitcoin reserve and predicted that other countries, along with institutional asset managers, would follow suit. He highlighted the scarcity of Bitcoin, with 94% of all possible Bitcoin already mined or lost, emphasizing the intense pressure on supply and demand dynamics.
The Inevitable Ripple of Scarcity
The tightening grip of scarcity on Bitcoin’s supply is not just a fleeting concern but a seismic force poised to reshape market dynamics profoundly. This scarcity is amplified by the halving events, systematically reducing the reward for mining new blocks, thereby constricting the flow of new coins into circulation. As we observe the ripple effects of this scarcity, it’s crucial to consider the broader implications for investors and the global economy.
The anticipation of a price increase is not merely speculative but grounded in a well-observed economic phenomenon: supply and demand. As Bitcoin becomes harder to obtain, its value is likely to skyrocket, making it an increasingly attractive asset for long-term investment. However, this scenario also presents challenges, such as increased volatility and speculative trading, which could lead to significant market corrections.
Moreover, the role of institutional investors and government reserves in this landscape cannot be underestimated. Their involvement could stabilize the market, but it could also lead to increased regulatory scrutiny and potential market manipulation.
As we stand on the brink of what may be another significant bull run, it is vital for both seasoned traders and newcomers to approach the market with a balanced perspective, recognizing the potential for both tremendous growth and considerable risk.
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