The January debuts of spot bitcoin ETFs in the U.S. have figured prominently in the cryptocurrency’s ascent this year. However, experienced crypto investors know that the upcoming quadrennial halving is likely playing a significant role in bitcoin’s 2024 bullishness.
In addition to the launches, the halving, which is slated for April, is supporting gains for crypto-correlated stocks, including some held by the Amplify Transformational Data Sharing ETF (BLOK). That exchange traded fund is higher by almost 13% for the month ending March 12 and up nearly 18% year-to-date.
One of the key elements of bitcoin halvings is that those events make it more difficult for miners to extract the cryptocurrency from networks. The current reward for processing a block of transactions is 6.25 bitcoins. That will decline to 3.125 following the halving. However, that’s not necessarily bad news for diverse crypto funds as highlighted by BLOK’s recent price action.
History Could Be Relevant for Bitcoin, BLOK
There is another reason BLOK is performing admirably this year. New spot bitcoin ETFs and the upcoming halving are having a similar impact on supply. As in their reducing bitcoin supply and the spot ETFs are stoking demand. Those dual forces are pivotal in the broader view of bitcoin pricing. The digital currency is very much beholden to supply/demand dynamics.
“Since Bitcoin has no underlying value—only a cost to produce—its price is entirely subject to supply and demand dynamics. The halving tends to have a positive impact because it further restricts supply, and Bitcoin has a history of outperforming after prior halvings,” reported Jack Denton for Barron’s.
The $706.47 million BLOK debuted in January 2018 meaning the ETF wasn’t around for the 2017 halving. With that in mind, it’s worth remembering that in financial markets, history isn’t guaranteed to repeat. Bitcoin and BLOK investors are hoping it does because the 2017 halving was a catalyst for bitcoin prices and arrived during a bull market, as is the case this year.
“After the last halving in 2020 — which came after the 2017 bull market — Bitcoin gained 33% in the next three months, was up by more than 80% at the six-month mark, and more than 500% a year after the halving, according to crypto tax firm CoinLedger,” noted Barron’s.
Another point in BLOK’s favor is that the ETF isn’t dedicated to bitcoin miners. Not even close. While the fund is home to several such stocks, its reach expands well beyond that industry and that’s a positive because, in recent weeks, investors have been selling shares of crypto miners in advance of the halving.
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