Bitcoin, the flagship cryptocurrency, has exhibited minimal response to its much-anticipated “halving” event, as industry experts suggest that its trajectory remains intricately entwined with broader financial sentiments and geopolitical developments.
The halving, a pivotal adjustment to Bitcoin’s underlying technology occurring approximately at 0014 GMT on Saturday, is designed to reduce the pace at which new bitcoins are generated. While enthusiasts anticipated this event with fervor, the immediate aftermath has seen subdued market movements, contrary to historical precedents where post-halving periods witnessed price surges.
As of 1415 GMT on Monday, Bitcoin was trading at US$66,300, reflecting marginal fluctuations. Despite registering a modest 1.2 per cent increase last week and a 3.4 per cent uptick on Monday, Bitcoin has encountered challenges in maintaining a definitive trend since reaching an all-time high of US$73,794 last month.
Mick Roche, senior trader at Zodia Markets, the crypto arm of Standard Chartered PLC, emphasized the overshadowing influence of geopolitical dynamics, stating, “The geopolitical events unfolding at the minute are having a larger impact than any impact from the halving.” Roche cited the perceived de-escalation of tensions between Iran and Israel as a significant factor shaping market sentiment.
Eric Demuth, CEO of Bitpanda, an Austrian cryptocurrency brokerage, underscored Bitcoin’s growing correlation with broader market sentiment, noting the absence of discernible retail trading patterns around the halving. Demuth remarked, “Crypto is so similar to stocks already. The same people that are trading stocks and tech stocks are also into crypto.”
The approval of spot bitcoin exchange-traded funds (ETFs) in the United States buoyed Bitcoin’s recovery last year amidst a series of market downturns in 2022. Ben Laidler, global markets strategist at eToro, emphasized Bitcoin’s transition towards institutionalization, envisioning regulatory reforms that would facilitate greater participation from corporations, banks, and central banks in Bitcoin ownership.
Despite Bitcoin’s prominence, cryptocurrencies remain a niche asset class, commanding a combined value of around US$2.5 trillion, according to market tracker CoinGecko. Regulators caution against the speculative nature of cryptocurrencies, citing inherent risks and limited real-world utility.
Market observers are eagerly awaiting a decision from the U.S. Securities and Exchange Commission regarding spot ETFs for ether, the second-largest cryptocurrency. However, sentiments regarding potential approval in May are waning, according to Demuth and Roche.