Bitcoin’s Halving Is an Issue of Supply & Demand

Bitcoin is halving soon.

To understand exactly what this means, I turn to Ian King — our bitcoin expert.

As for wrapping my head around the impact we’ll see on price, I also look to Econ 101, the intro to economics many of us took in college.

You may remember it as the one where the professor droned on and on about supply and demand curves. Well, turns out those curves are important to understand right now.

Bitcoin is entering a time when supply and demand curves will shift. And these shifts point to an inescapable conclusion.

When bitcoin halves, the amount of new supply will decrease.

In the chart below, that means the supply curve will shift to the left — as shown by the green line.

Econ 101 - Supply vs. Demand of Bitcoin's Halving

Source: Marginal Revolution University.

That shift results from the fact that the quantity of bitcoins, actually the change in the quantity of bitcoin in this case, will decrease. 

Falling Supply + Rising Demand = Higher Prices

When supply decreases while demand remains steady, prices should increase. In this simple model, we should expect bitcoin prices to go up.

Of course, the actual supply and demand curve is a little more complex. The decrease in supply comes at the same time demand is increasing.

We have seen demand grow after bitcoin exchange-traded funds launched in January. The pace of new investments in the funds is unprecedented.

The largest fund, iShares Bitcoin Trust (IBIT), has grown to more than $14 billion in just two months. You can see its rapid growth in the chart below:

Bitcoin ETF iShares Bitcoin Trust (IBIT)

Source: iShares.

Now, the pace of growth could slow. But that might not be for some time. News about bitcoin’s halving is generating interest in cryptocurrency among potential investors.

Benefiting from the “Perfect Storm” Equation

Excitement about bitcoin coincides with the approaching deadline for retirement account deposits next month.

To reduce taxes, billions of dollars will pour into IRAs and 401k accounts in the next four weeks. Some of that is likely to end up in bitcoin, a new asset class available in retirement accounts for the first time.

This all adds up to a “perfect storm.”

Although this is the fourth bitcoin halving, there’s never been another one like this. Demand is rising, and tax deadlines will drive even more demand.

Supply is decreasing as demand is increasing. Econ 101 tells us this must lead to higher prices.

Those who want to position themselves now for the chance to profit in the upcoming crypto bull market will find that there are many ways to trade bitcoin and other cryptocurrencies.

It’s a specialized market, and only experts truly understand how and where to find the best trade opportunities.

My go-to expert is my friend, Ian King.

He is gearing up to share his latest research in a webinar called The 4th Halving,” where on Tuesday, March 19 at 1 p.m. ET, he’ll reveal a unique pattern that uncovers lesser-known cryptos with massive growth potential.

You can sign up for free to see Ian’s event right here.

Regards,

Michael Carr's Signature
Michael Carr
Editor, Precision Profits

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