In a new analysis, crypto asset management firm, GrayScale, says that Bitcoin’s technical fundamentals and use cases have significantly increased ahead of the upcoming halving in April 2024.
“Despite miner revenue challenges in the short term, fundamental on-chain activity and positive market structure updates make this halving different on a fundamental level,” researcher Michael Zhao said.
“While it has long been heralded as digital gold, recent developments suggest that bitcoin is evolving into something even more significant.”
Bitcoin halving is an event that occurs approximately every four years in the Bitcoin network. It’s a programmed event in the Bitcoin protocol where the reward that miners receive for confirming transactions on the network is reduced by half.
Halving events are closely watched by the cryptocurrency community as they can have significant effects on the supply and demand dynamics of Bitcoin, potentially influencing its price.
Bitcoin’s Price Tends to Increase Post-HalvingZhao highlighted that the introduction of ordinal inscriptions and BRC-20 tokens has re-invigorated on-chain engagement with Bitcoin, resulting in over $200 million in transaction fees for miners by February 2024.
The BRC-20 standard (BRC stands for Bitcoin Request for Comment) was introduced in April 2023 to allow users to issue transferable tokens directly through the network for the first time.
EXPLAINER: A Look at the Popular Bitcoin BRC-20 Token Standard Inspired by Ordinal NFTs
BRC-20 tokens don’t make use of smart contracts. The token standard also requires a Bitcoin wallet to mint and trade these tokens.https://t.co/3Kfs4oL444 #BRC20
— BitKE (@BitcoinKE) May 21, 2023
The tokens, referred to as inscriptions, operate within the framework of the Ordinals Protocol. This protocol enables users to embed data onto the Bitcoin blockchain by incorporating references to digital art into compact transactions based on Bitcoin.
Daily and Cumulative Inscription Fees ($)Apart from the generally positive on-chain fundamentals, the report suggests that Bitcoin’s market structure appears conducive to price appreciation after the halving event. The anticipated reduction in rewards is expected to necessitate comparatively less buying pressure to sustain prices, potentially leading to upward price movement due to increased demand.
“Historically, block rewards have introduced potential sell pressure to the market, with the possibility that all newly mined bitcoin could be sold, impacting prices,” Zhao wrote.
“Currently, 6.25 bitcoin mined per block equates to approximately $14 billion annually (assuming bitcoin price is $43K).”
“In order to maintain current prices, a corresponding buy pressure of $14 billion annually is needed,” he stated, adding that these requirements will decrease ‘to $7 billion annually’ after the halving as rewards fall to 3.25 bitcoin per block, ‘effectively easing the selling pressure.’
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