The next bitcoin halving – the process through which mining of the cryptocurrency becomes more difficult – is about two months away and will officially arrive when 840,000 blocks is reached.
Recent price action by the largest cryptocurrency suggests that event is being priced into the asset. The same is true for shares of bitcoin miners and the related exchange traded funds. Following a sluggish start to 2024, the Invesco Alerian Galaxy Crypto Economy ETF (SATO) jumped 9.60% last week, extending its one-month gain to 33.27%.
SATO is home to 41 holdings, many of which are direct plays on bitcoin. For example, the Grayscale Bitcoin Trust (GBTC) accounts for 14.40% of SATO’s roster, indicating the Invesco ETF has inroads to the spot bitcoin ETF phenomenon. Additionally, SATO allocates 4.41% of its roster to MicroStrategy (MSTR). MSTR is sitting on a multi-billion profit by way of the bitcoin it started buying four years ago. And we haven’t yet gotten to SATO’s mining plays.
SATO Relevant Play on Bitoin Halving
For novice cryptocurrency investors, it may appear as though making the mining process more difficult, which the halving will do, is a potential drag on miners and SATO member firms. However, that increased difficulty enhances the digital currency’s scarcity. That increased scarcity can act as a price catalyst, which could potentially facilitate upside for crypto-correlated equities, including SATO holding.
Investors evaluating SATO might want to consider how some professional money managers are viewing the upcoming halving – bitcoin’s fourth. A recent survey by London-based Nickel Digital Asset Management indicates pros are bullish on the halving.
The survey “found 81% expect the halving to be positive for Bitcoin’s price. Around 25% believe it will be very positive,” according to Nickel Digital. “Around seven out of 10 (69%) questioned believe the halving will increase investment levels in Bitcoin with 18% expecting a dramatic increase. Just 2% believe the halving will reduce investment in the currency.”
Here’s something else for SATO investors to ponder. While the halving doesn’t eliminate bitcoin supply from the market, it makes harder for new supply to come to market. That stands in stark contrast to fiat currencies. Manty of those flooded the global financial system in recent years amid central bank easing and slack fiscal policy.
“Yet, one aspect remains undisputed: the halving effect, governed by an algorithmic protocol, starkly contrasts with the habitual expansion of monetary supply by central banks, which often leads to financial systems plagued by inflationary pressures,” notes Nickel Digital CEO Anatoly Crachilov.
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