The new Grayscale report reveals the reasons for an exceptional Bitcoin 2024 halving!

The Bitcoin halving in 2024 is fast approaching and according to Grayscale’s new report, it will be exceptional! While previous halvings have been associated with price rallies, numerous fundamental developments make this one unique. The Bitcoin ecosystem has evolved significantly, supported by the rise of ordinals, Bitcoin spot ETFs, and sustained on-chain activity.

Impacts on Supply and Miners

The halving will reduce Bitcoin issuance from 6.25 to 3.125 BTC per block, which poses a challenge for miners’ revenues. However, miners have prepared by raising funds and selling reserves. Marathon Digital conducted a hybrid capital raise of $750 million, while others like Core Scientific and Stronghold raised $55 million and $15 million, respectively.

Moreover, despite higher transaction fees, the surge of ordinals (with 59 million assets registered to date) and Layer 2 solutions offer new revenue sources for miners. Ordinal inscription fees have generated over $200 million in transaction fees. Solutions like Stacks introduce fully expressive smart contracts on Bitcoin.

The community is exploring Layer 2 rollups similar to those undertaken by Ethereum to improve scalability. The growing interest in Taproot-compatible wallets indicates a collective movement towards addressing these challenges.

Bitcoin Market Structure

Historically, halvings introduce a sell-side pressure on the market from miners. However, Bitcoin ETFs are likely absorbing some of this pressure.

With this halving, the issuance will go from 6.25 to 3.125 BTC per block, approximately from $14 billion per year to $7 billion. Net inflows into Bitcoin spot ETFs could counterbalance this sell-side pressure.

The initial net inflows into these products were $1.5 billion in 15 trading days. Assuming $10 million of net daily inflows, this could represent 50% of the daily issuance, fundamentally transforming the market structure.

Unlike previous Bitcoin halvings, the 2024 halving occurs in a fundamentally different context, with sustained on-chain activity and a positive evolution of the market structure. These factors suggest that the 2024 halving could have a lasting positive impact on Bitcoin, strengthening its unique position as a deflationary and decentralized digital asset.