Bitcoin‘s (BTC) anticipated fourth block reward halving around April 19-20 is raising expectations in the cryptocurrency world. This event, which occurs approximately every four years, will reduce the BTC reward per mined block from 6.25 to 3.125, effectively cutting the new supply rate by 50%. Despite historical trends suggesting significant and prolonged rallies before previous halvings, many in the crypto market expect similar outcomes this time, although Goldman Sachs has issued a warning.
Emphasis on Changing Macroeconomic Conditions
American banking giant Goldman Sachs has sent a cautionary note to its clients regarding the interpretation of past block reward halvings. The Fixed Income, Currencies, and Commodities (FICC) and Equity teams at Goldman Sachs acknowledge that price gains post-halving have been a recurring trend, but they emphasize the need for caution due to different cycles and changing macroeconomic conditions.
Historical data from previous halvings on November 28, 2012, July 9, 2016, and May 11, 2020, show that each was followed by a dominant bullish trend in the crypto market. However, it’s important to note that the magnitude and duration of these price rallies varied. More importantly, as Goldman Sachs highlights, the macroeconomic environment during these periods was significantly different from today’s environment, characterized by high inflation and interest rates.
Unlike previous halvings, today’s macroeconomic environment features high interest rates, inflationary pressures, and a prevailing sentiment of a strong economy in the US and other major economies. This contrasts with the low or negative interest rates and rapid money supply growth observed during previous halving cycles, discouraging risk-taking in global markets, including cryptocurrencies.
“Buy the Rumor, Sell the News” Expectation
Bitcoin has seen a 50% increase in value from the beginning of the year to current prices, supported by entries into US-based spot exchange-traded funds (ETFs) ahead of the anticipated block reward halving, reaching record levels. Some analysts believe that much of the typical post-halving rally may have already occurred due to this. This has led to speculation about a possible “buy the rumor, sell the news” scenario following the expected halving on April 19 or 20.
Goldman Sachs views the limited supply post-halving as a psychological reminder, while emphasizing that the mid-term outlook depends on the adoption of spot Bitcoin ETFs. Whether the halving leads to a “buy the rumor, sell the news” dynamic may have less impact on Bitcoin’s mid-term trajectory compared to supply-demand dynamics and ongoing demand for spot Bitcoin ETFs. These factors, combined with the self-reflective nature of the crypto market, will be the main determinants of forward-looking spot price movements.
