The Pulse: The Bitcoin halving has occurred. Now it gets interesting
It is easy to see Bitcoin rising after the halving.
The cryptocurrency is entering its next phase, fueled by billions of dollars in demand from spot Bitcoin ETFs in the U.S., with more coming later this year from options trading and availability through large money transfer houses. Additionally, ETFs in Hong Kong and elsewhere could open the door to access more investors.
At the same time, the amount of supply in circulation will be greatly reduced, which may lead to a ‘huge supply shock’ that some predict. Simply put, there can be a lot of demand for Bitcoin even though there isn’t a lot of it.
However, it is worth considering the bearish case for Bitcoin, even if it is harder to see.
The key idea here is that the halving cut Bitcoin miners’ profits by almost half. This will likely reduce the number of profitable miners and may cause hash rates to drop over time.
There are two ways to offset this: The first is price. For example, a doubling of the price of Bitcoin could offset the impact of a halving. However, if the price of Bitcoin falls, it will cause more pain for miners.
The second way is through transaction fees. There is hope that Ordinals-based projects and similar ideas like Runes can add value to everyday transactions. On the other hand, new products like ETFs are facilitating a lot of Bitcoin trading and investing without requiring a lot of on-chain transactions.
These are the two main arguments either way. Now what’s interesting about both is that they each have their own flywheel. For bulls, if Bitcoin price cooperates, ETF demand could surge, which could create continued momentum. Ultimately, this could drive more interest and adoption while continuing on the current trajectory.
However, in a bearish scenario, falling prices could lead to selling pressure on ETFs and lower trading fees, which, along with lower mining rewards, could mean fewer miners keeping the network safe. This has always been a theoretical problem, but one that may one day have to be solved.
The halving has been happening like clockwork, but the real test has only just begun.
Now let’s take a look at some of the stories that caught my attention this week.
Mango Markets exploiter found guilty
I remember when I first asked Avraham Eisenberg about the accusation that he was behind the $110 million Mango Markets exploit. He responded, “The fanfiction written about me is really amazing.” It was two days later that he said an official statement might be issued.
At the time he admitted being part of the ‘team’ behind the attack. He insisted at the time – and later continued in court – that it was just a clever deal. But this argument ultimately proved unconvincing, and he was found guilty of merchandise fraud, merchandise tampering, and wire fraud. His sentencing date is July 29.
Telegram accepts Tether
As reported by The Block, stablecoin issuer Tether has expanded its USDT stablecoin to the TON blockchain. This will allow Telegram’s 900 million monthly active users to easily send stablecoins to other users. Telegram wallet bot offers free USDT trading until the end of June.
Telegram CEO Pavel Durov added at Token 2049 in Dubai that Telegram earned $350 million through tokenizing and selling usernames. He said the next step is to tokenize stickers that can be used through the app. According to his slideshow, 730 billion of them are sent every month.
Many projects are working on decentralized social media, but Telegram’s combination of centralized apps and decentralized features is definitely an experiment to watch.
Hong Kong prepares Bitcoin and Ethereum ETFs
Hong Kong has approved applications from several spot Bitcoin and Ethereum exchange-traded funds, my colleague Timmy Shen writes. Hong Kong asset managers, including ChinaAMC and Harvest Global, plan to launch spot Bitcoin exchange-traded funds as early as the end of this month.
Estimates of potential inflows to the Bitcoin ETF are quite conservative, with Bloomberg senior ETF analyst Eric Balchunas predicting the Bitcoin ETF will be worth less than $500 million. This is the result of comparing the overall market size of the United States and Hong Kong.
But in The Block X space of Bitcoin halving, Jeff Park, Head of Alpha Strategy and Portfolio Manager at Bitwise, argued that this may be an understatement. He said looking at commodities like gold might be a fairer comparison, suggesting the Bitcoin ETF could perform better than expected.
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