Here’s Why the Effect of Bitcoin Halving is Diminishing, According to CryptoQuant

Crypto market analytics platform CryptoQuant believes the effects of Bitcoin halvings have been diminishing and that the upcoming event will have an even smaller impact on BTC’s value.

In the latest edition of the firm’s weekly crypto report, analysts said the effect of the halving has been reducing because the new issuance of BTC keeps getting smaller in relation to the number being sold by long-term holders, signaling that demand will be the key driver of prices post-halving.

Bitcoin Halving Effect on a Decline

According to the report, Bitcoin monthly issuance has fallen to 4% of the total BTC supply available. Before the first, second, and third halving events, Bitcoin issuance represented 69%, 27%, and 10% of the available BTC supply. Last year, Bitcoin issuance averaged 28,000 per month, compared to the 417,000 BTC offloaded by long-term holders within the same timeframe.

Demand from permanent BTC holders has also surpassed issuance for the first time in history, with this cohort of investors adding roughly 200,000 BTC to their balances monthly, a far cry from the 28,000 BTC issuance.

Analysts believe long-term holder Bitcoin spending correlates with the price cycle because BTC bottoms at low long-term holder spending periods and peaks at extremely high spending levels relative to the total supply. At the time of writing, long-term holder spending is at low levels.

After the Bitcoin halving on April 20, the monthly issuance will decline to approximately 14,000, leaving demand growth to drive BTC prices to higher levels.

The Impact of Large BTC Holders

In previous cycles, the rise in Bitcoin demand growth from large holders and whales fueled the post-halving price rallies. With the current demand growth hovering around 11% month-on-month, its highest ever, it is evident that this factor has been the primary catalyst behind BTC surges.

CryptoQuant’s claims are substantiated by Bitcoin reaching a new all-time high before halving for the first time last month. The rally was driven by surging demand for the spot Bitcoin exchange-traded funds launched in January.

Meanwhile, analysts believe the selling pressure from OG BTC holders (those with coins 5+ years old) will increase after the halving.

“Spending from OG Holders is currently at around 8% annualized and historically has been 1.1%, while current issuance (orange area) stands at 1.8% annualized and will drop to ~0.8% annualized after this month’s halving,” the report stated.