Bitcoin Post-Halving Bitcoin Talking Points:
- Decentralized digital gold campaign
- More institutional investors, more derivatives
- Bitcoin scaling up, green mining
- Regulation and CBDCs
The third Bitcoin (BTC) halving has finally happened, the hash rate fell less than anticipated, fees escalated, but, contrary to the skeptics, the BTC price hasn’t dropped.
So what next? What will be the next talking point as the “priced in/not priced in” debate has now disappeared together with 50% of the block subsidy on the 11th of May?
According to industry experts, a number of key narratives and trends are likely to dominate BTC’s fate over the next 12 months.
From BTC’s increasing attractiveness as a safe-haven asset in times of economic crisis to growing regulation, all of these narratives could ultimately make BTC more mainstream and more accessible to a wider group of investors.
Decentralized Digital Gold Campaign.
The CEO of major crypto exchange OKEx Jay Hao, tells us that the ongoing Coronavirus outbreak may produce sell-off pressure on BTC in the short-term. However, he expects the narrative of BTC as ‘digital gold’ to grow in standing following the initial aftermath of the halving.
“However, the macro context looks bullish for BTC in the mid-to longer term,” he says.
“As people begin to question the value of ‘helicopter money’ and the effect that unchecked inflation of money supply has, BTC has just done the exact opposite… I think a big trend we will see this year is BTC further strengthening its status as ‘digital gold’.”
Binance’s analysis agrees with this.
“Now, every time a major central bank will print money… the original BTC ethos is likely to gain new traction,” an expert tells us. “The original BTC narrative is likely to reemerge or be reinforced: BTC as a safe-haven asset ‘digital gold’.”
More Institutional Investors and More Derivatives.
As a result of BTC’s growing deflationary standing, experts are expecting another key post-BTC halving narrative to surface: an increase in institutional investors.
“We will also see more institutional investors coming on board now that they see BTC as a hedge,” says Jay Hao. “We’re already seeing some very bullish signs for the market like famous macro investor Paul Tudor Jones adding BTC to his public fund portfolio as a hedge.”
Hao reminds us that investment banking giant JPMorgan has also recently opened accounts for crypto-exchanges Coinbase and Gemini.
In his view, this “will certainly open up the gates for more exchanges and more big banks globally.”
On top of this, Hao expects to see the “BTC derivatives market continue to grow and become exponentially bigger, perhaps even three or four times bigger than the spot in the next 12 months.”
However, not all experts believe that the current economic conditions are ready for steady growth in institutional investment. Also speaking to us, analyst Fawad Razaqzada believes there’s a risk BTC may correct itself in the coming months.
“Unemployment has skyrocketed across the globe and companies are filing for bankruptcies left, right and center,” he says.
“And while central banks and governments are doing all they can to address the supply side of the economy, demand from households and businesses could nonetheless remain soft for a long time which could undermine the economic recovery.”
Against this fundamental backdrop, Razaqzada suspects that BTC investors may take advantage of higher prices to book profit, while others may be put off by the volatile economic circumstances. As such, the narrative could be one of frustration potentially.
BTC Scaling Up and Green Mining.
Another less prominent — and longer-term — narrative will relate to BTC scaling. As Ethereum (ETH) eventually transitions to the proof-of-stake (PoS) Ethereum 2.0, experts are expecting such developments to put extra pressure on BTC to develop its own scaling solutions, as well as more ecological mining methods.
Jay Hao says, “BTC has scalability issues, but there are many protocols being worked on such as the Lightning Network and Liquid sidechain. I think the challenges for BTC and other (proof-of-work) coins are to find more energy-efficient ways of mining with more sophisticated equipment, green energy, and cloud solutions moving forward.”
Likewise, the Binance expert doesn’t expect BTC to be swayed too much by ETH’s shift to PoS.
However, this might change in the long term, “as BTC is indeed facing foreseeable and inherent problems.”
Basically, Binance foresees that one longer-term narrative for BTC will relate to how it solves the problem of diminishing block rewards. While some experts believe that BTC will have to fundamentally reform itself to overcome this challenge, Binance believes that “non-custodial off-chain solutions, such as the Lightning Network, could avoid the necessity to choose between… compromises.”
Regulation and CBDCs.
Lastly, tightening regulation is likely to be another BTC narrative in the coming months and years, particularly as Facebook’s Libra forces regulators to sit up and take notice of cryptocurrencies.
“The organization behind the FATF, the Financial Stability Board, urged countries to adopt and enforce local variants of the FATF’s recommendation before Libra was to launch,” explains Binance expert. “So yes, the arrival of Libra very likely fast-tracked regulations that are not only applicable to stable coins but to crypto-assets more generally.”
Moreover, Jay Hao expects that Libra and central bank digital currencies (CBDCs) will, in the end, channel more attention towards BTC and other cryptocurrencies.
“Once they begin to learn about cryptocurrencies by using a central bank-backed version of them or a corporate coin, they will have the knowledge and many will develop a natural interest in BTC, less of a medium of exchange and more of a store of value.”
ames Stewart
Fundamental Analyst for Global Markets
James has over 20 years of experience trading FX, cryptocurrencies and investments products for a range of investment banks and brokers
He spent the last 10 years analyzing and writing about foreign exchange, crypto-currencies and the global financial markets
He has also spoken at a range of conferences around the globe on various financial topics.
