Retail demand for bitcoin (BTC) appears to be going strong, and according to a recent research report by JPMorgan, this trend is likely to continue over the coming year, with the upcoming halving event in April 2024 playing a significant role. The increase in retail demand can be partially credited to the introduction of Bitcoin Ordinals and BRC-20 tokens. However, the primary factor cited by JPMorgan is the anticipation surrounding the next halving event.
Halving events, during which mining rewards are reduced by 50%, have a substantial impact on the bitcoin ecosystem. For instance, the anticipated halving event in 2024 is expected to double the cost of bitcoin production to approximately $40,000, thereby creating a positive psychological effect amongst investors. Historically, the production cost has served as a lower boundary for bitcoin prices. This observation is further supported by previous halving events in 2016 and 2020, both of which were followed by surges in the value of the cryptocurrency and accompanying bullish market trends.
In contrast, institutional demand for bitcoin seems to be waning. Factors such as fraud, increased volatility, and a regulatory crackdown in the US this year have sowed seeds of uncertainty among institutional investors. As a result, they have become less inclined to invest in cryptocurrencies.
Interestingly, a previous JPMorgan report highlighted that both gold and bitcoin experienced strong rallies in the aftermath of the collapse of Silicon Valley Bank. In this case, institutional investors gravitated towards gold, while retail investors chose bitcoin, demonstrating a divergence in investment preferences between these two groups. Both asset classes were seen as hedges against a catastrophic scenario, but it appears that retail and institutional investors have different risk appetites when it comes to their preferred store of value.
While the upcoming halving event is projected to boost retail demand further and bolster the bitcoin market, it’s hard to ignore the contrasting decline in institutional demand. This raises several questions, such as how the digital currency will fare in the face of wavering institutional support, and whether retail demand alone will suffice to maintain and drive bitcoin’s value in the long run.
In conclusion, notable events like the bitcoin halving have the potential to sway market trends significantly. Yet, simultaneously examining other factors like the diverging interests of retail and institutional investors can provide a broader understanding of the cryptocurrency’s future trajectory. As the April 2024 halving event approaches, it will be crucial for investors to analyze developments surrounding the digital asset and adjust their investment strategies accordingly.
Source: Coindesk
