Opinion: The third halving was not the main driver of Bitcoin’s rally

Bitcoin's rally appears more sustainable this time, driven by inflation and institutional demand, not the halving.

Since the third halving, Bitcoin has more than doubled—from $8,570 to over $18,000. Coin Metrics co-founder Nic Carter says that this was largely driven not by the reduction in block rewards but by fiat currency inflation and the development of institutional infrastructure.

«I don’t think the halving had a meaningful effect on the price of bitcoin.»

A bold statement from Castle Island Ventures Nic Carter to @TheStalwart @CarolineHydeTV & @romainebostick as they discuss bitcoin, inflation & the push back to record prices https://t.co/OF4udHiE5b pic.twitter.com/BfuXn6kbvw

— Bloomberg TV (@BloombergTV) November 19, 2020

Bloomberg TV hosts asked whether the halving that occurred six months ago is already priced into Bitcoin’s price. The analyst warned that most users would disagree with his answer.

«I don’t think the halving had a meaningful effect on the price of bitcoin. This is an event that was known from day zero. I think the catalysts are outside the market or related to infrastructure,» Carter said.

The expert said the current rally seems more sustainable than the one seen three years ago.

Carter noted that in 2017 the market was pushed higher by retail investors who, via Bitcoin, moved into other crypto assets and participated in ICOs. Large players simply could not enter the market due to the lack of suitable infrastructure.

«There were no qualified custodians yet, prime-brokerage was just gaining strength. Essentially, there was no lending market, and futures trading on the CME had just begun,» Carter noted.

In the last three years access to the market for large institutional investors has become “more comfortable”. As an example, he cited the Bitcoin purchases by MicroStrategy and Square.

Carter noted that this new class of market participants is geared toward long-term holding of the leading cryptocurrency as a hedge against inflation driven by unprecedented monetary measures by governments. Investors are concerned about the prospect of rates deepening into negative territory. They are attracted by Bitcoin’s algorithmically capped supply, he added.

«Perhaps Bitcoin is a slowly monetizable alternative monetary exchange-traded commodity,» Carter said, explaining investors’ perception.

As Chainalysis analysts noted, the reason for Bitcoin’s rise was an ‘insatiable appetite’ among institutions.

Earlier, Deutsche Bank analysts found that investors are increasingly preferring Bitcoin to gold.

Citibank specialists speculated that the first cryptocurrency would cement its status as digital gold and reach $318,315 by the end of 2021.

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