Bitcoin halving won’t be enough to sustain a bull run: Kaiko Research

Bitcoin’s latest halving event is unlikely to trigger a sustained bull run over the next 12 to 18 months, according to the report “Bitcoin’s Fourth Halving: This Time is Different?” by analysis firm Kaiko.

Despite historical periods of substantial returns post-halving, the current climate is marked by a mature asset class and uncertain macroeconomic conditions. A potential bull run hinges on Bitcoin’s appeal to new investors, possibly through spot ETFs in the US and Hong Kong. Thus, robust liquidity and increasing demand are essential for enhancing Bitcoin’s value proposition shortly.

The market’s reaction to the halving is complicated by mixed sentiments, with spot ETF approvals and improved liquidity conditions on one side and macroeconomic uncertainty on the other.

Historically, the impact of Bitcoin’s halving has varied, with the long-term effects tending to be bullish. However, the Efficient Market Hypothesis suggests that the market has already accounted for the halving by pricing in the anticipated reduction in supply. “Efficient markets, in theory, reflect all known information about an asset,” said Kaiko analysts, indicating that the halving’s effects might be less influential than expected.

Moreover, transaction fees have seen a notable increase, with a recent spike driven by a new protocol on Bitcoin that heightened demand for block space, called Runes. 

Looking ahead, liquidity will play a pivotal role in the post-halving market. The approval of Bitcoin spot ETFs has aided in the recovery of liquidity levels, which is positive for the crypto price stability and investor confidence. However, the first halving in a high-interest-rate environment presents an unprecedented scenario, leaving Bitcoin’s long-term trading performance an open question.

Expectations toned down

Darren Franceschini, co-founder of Fideum, believes that the upcoming weeks aren’t likely to show much excitement. A typical post-halving phase is in play, which translates to the market going sideways before eventually embarking on a substantial uptrend that doesn’t culminate until the next all-time high.

“I find it more practical to moderate my expectations based on historical cycles rather than get swept up in baseless market optimism,” stated Franceschini.

Furthermore, while not making explicit predictions, he adds that investors who enter the market now and plan their exit strategy wisely by recognizing the peak could see substantial returns fuelled by the historical upside after halvings.

Nevertheless, Franceschini also doesn’t see the halving being impactful for both retail and institutional investors.

“Retail investors often base their decisions on emotion and hype, though a minority may employ basic technical analysis to forecast price movements. On the other hand, institutional investors approach Bitcoin with the same fundamental strategies they apply to commodities trading. […] It is important for retail investors to recognize that with increasing institutional participation, they can expect shifts in market trends and cycles, driven by the significant buying and selling power of these larger entities.”