As the Bitcoin (BTC) halving event approaches, speculators are likely to position themselves in advance, anticipating potential changes in the market. However, K33 CEO Torbjørn Bull Jenssen tells long-term investors that they should focus on the demand side of the market rather than the halving itself.
Jenssen said in his statement:
“We expect speculators to act in advance in this event, as in all halving events in the past. “On average, Bitcoin gained 14% in the month leading up to the halving, and we wouldn't be surprised if 2024 follows suit.”
According to analysts, Bitcoin's current inflation rate is around 1.8%, roughly the same as gold. This rate is expected to drop to 0.9% at the end of April with the halving. Jenssen explains that without a change in demand, the halving should trigger a price increase of only 0.9% in the first year after the halving, compared to the situation without the halving:
“With no change in demand, market value should remain constant. With 1.8% annual inflation in Bitcoin supply, the price would have to fall by 1.8% for the market value to remain the same. When inflation is 0.9%, the decrease should only be 0.9%.”
Although the halving is a supply event, Jenssen emphasizes that its effect on price must come from the demand side, as the pure supply effect is almost non-existent. He also notes that many Bitcoin holders have completed all their investments and do not have any more dollars to buy BTC. So price is determined to some extent by the balance between marginal buyer and marginal seller:
“Doubling the price would be a significant move, but looking at past halvings and popular predictions such as the long-debunked but still used Stock-to-Flow model, optimists are expecting a 10x price increase. “This cannot be explained by the halving alone and will only happen if there is a large increase in demand, which is actually very unlikely.”
*This is not investment advice.