- Bitcoin shows restrained growth post-halving.
- Investor sentiment still indicates bearish dominance.
- Exchange balances of the leading cryptocurrency have decreased, yet whales continue to send assets to trading platforms.
Following Bitcoin’s halving on April 20, crypto assets are recovering from losses induced by geopolitical tensions, according to a report by ETC Group’s Head of Research, Andre Dragos.
At the time of writing, digital gold is trading at $66,500, having gained nearly 6% over the past week.
“The positive effect of the halving is not yet accounted for and is expected to manifest only about 100 days after the event — that is, from July 2024,” stated the researcher.
The primary driver of growth will be the Bitcoin supply shortage, which will accumulate over time and be “quite insignificant in the very short term.”
Dragos also noted an increase in transaction costs on the network of the first cryptocurrency amid the hype around Runes:
“The rise in fees will only accelerate the adoption of more economical L2 solutions like the Lightning Network and will not pose a significant risk to Bitcoin. On the contrary, the percentage increase in fees from the total reward should incentivize miners to protect the network while the block reward decreases.”
Meanwhile, Ethereum has outperformed Bitcoin amid a “stalled bull rally and general altcoin rotation.”
The overall dominance of altcoins over the first cryptocurrency has also strengthened. About 65% of the coins tracked by analysts showed better dynamics than digital gold.
Sentiments
The “Crypto Sentiment Index” developed by ETC Group has risen from annual lows. However, the indicator still signals bearish dominance, the expert clarified.
“Given the significant deterioration in sentiment, we consider short-term stabilization quite likely. Last week saw a significant shift towards a decline in the dominance of global crypto hedge funds and the liquidation of long Bitcoin futures,” Dragos noted.
According to ETC Group, the stock market is also experiencing a decline in interest in risky assets, indicating a strengthening of bearish sentiments. Meanwhile, the crypto fear and greed index stands at 71 — in a state of “greed.”
“The high performance disparity among cryptocurrencies means that their correlation is low. Currently, digital assets are more dependent on factors specific to each coin and are increasingly decoupling from Bitcoin’s performance,” the report states.
On-Chain Data
Despite the recent drop of the first cryptocurrency to $60,000, exchange balances of the asset have reached a multi-year low, ETC Group indicated.
However, the sell-off led to an increase in net Bitcoin transfers to trading platforms from large wallets (over $10 million), which is traditionally a bearish signal.
Significant inflows to exchanges were also observed from whales (holding more than 1000 BTC).
Last week recorded a negative net purchase volume of digital gold, amounting to -$261 million. The key reason was the outflow from spot exchange-traded funds based on the coin.
The increase in “inscriptions,” which caused a rise in network activity and fees on the blockchain, could pose a short-term obstacle for Bitcoin, as the number of active addresses has fallen to a yearly low, Dragos emphasized.
“High transaction fees will lead to reduced network usage, as users will wait for lower values. The transaction fee is becoming increasingly high for some users,” he added.
Previously, experts in comments to ForkLog discussed post-halving dynamics and explained the reasons for the market’s weak response to the event.
Back in April, in honor of the halving, the ForkLog team held the AllTimeHalf 2024 online forum with developers, entrepreneurs, enthusiasts, and visionaries. Recordings are available on the YouTube channel.
We also suggest exploring the event-related research by CoinGecko and Binance.