A less publicized but no less consequential event—the Bitcoin halving—looms on the horizon. Yet, investors are preoccupied with the possibility of the US SEC approval for a spot Bitcoin exchange-traded funds (ETF). In 111 days, on April 22, 2024, this BTC halving event will take place.
According to crypto specialist Rekt Capital, there are five significant stages leading up to the halving, each of which will affect the market and investors.
Will The Next Bitcoin Halving Exhibit A Historical Trajectory?
The pre-halving period is critical because it suggests what happens following the halving. Historically, investors get a good ROI after this event, especially if there are deeper retracements, according to Rekt Capital.
A broader market rally often occurs two months before the halving. This phase sees traders implement the “buy the hype, sell the news” technique. Short-term traders and speculators buy during this period, then sell just before the halving.
Usually, retracements cause price drops around the halving event, with the 2016 and 2020 declines being -38% and -20%, respectively. Nevertheless, market retracements often lead to re-accumulation. This cycle often causes a spike in BTC’s value, causing it to set a new peak price.
Halving And ETF Approval
Meanwhile, analysts wonder whether the approaching spot Bitcoin ETF approval and this year’s halving will differ from historical trends. Gabor Gurbacs, a Tether and VanEck advisor, believes many investors overestimate the first impact of US Bitcoin ETFs.
He estimates that the initial influx may be several hundred million dollars, mostly from recycled sources. However, Gurbacs notes that spot ETFs have been undervalued over time.
Using gold as an example, he stated that gold’s value increased 5-fold in eight successive years between 2005 and 2012, following a spot gold ETF approval.
Surging Perpetual Funding Rates
On January 1, the price of holding bullish positions or leveraged bets in Bitcoin’s perpetual futures market skyrocketed as the cryptocurrency climbed beyond $45,000 for the first time since April 2022. During Asian trading hours, data from Matrixport showed that the world’s average permanent financing rates spiked to a record high of 66% per annum.
This type of futures does not have an expiration date and instead uses funding rates to change its price in response to changes in the market value of the cryptocurrency. When rates are favorable, long positions pay shorts to keep their positions open; when rates are negative, perpetual are priced higher than the spot.
It is worth noting that exchanges compile these rates every eight hours. The head of research and strategy at Matrixport, Markus Thielen, highlighted the historic funding rate of +66%.
According to Thielen, the strong funding rate for Bitcoin has persisted despite the holiday season. This consistency indicates that the bullish mood is constant and is driven by hopes of an upcoming Bitcoin ETF approval.
What To Expect
Meanwhile, Bitcoin’s price is still above $45,000, and there are no signs that bulls are ready to allow the bears to take over. BTC’s price experienced a 56% rise in Q4 of 2023 due to the excitement that the US SEC would approve one or more spot Bitcoin exchange-traded funds.
Reports suggest that the regulator would make its decision public and could make the crypto market more volatile. Even though funding rates have been skyrocketing, the bullish trend that has continued shows that crypto investors and traders are still optimistic about the SEC’s decision.
