Bitcoin scarcity escalates as halving nears

Quick Take

Bitcoin’s halvings, as highlighted in Pantera’s recent newsletter, play a significant role in constricting the production of new Bitcoins. The first halving led to a 17% reduction in new supply as a percentage of outstanding Bitcoin, marking the onset of a trend.

This trend intensified in the 2016 halving; in terms of reduction in new supply as a percentage of the previous halving, it dropped by a third. In 2020, the reduction rate escalated to 43%. According to Pantera, the 2024 halving will result in an almost 50% cutback, chiefly due to the substantial number of Bitcoins already in circulation.

Sequential halvings magnify Bitcoin’s deflationary character and elucidate the cryptocurrency’s scarcity, an element central to its value proposition. As the reduction rate approaches the 50% mark, the Bitcoin market is poised to encounter increased scarcity, which may significantly influence price dynamics.

Historical analysis from Pantera indicates similar trends, with the percentage of the previous halving rally experiencing a 32% increase for 2016 and 23% appreciation in 2020. Pantera is projecting a 47% surge up to the 2024 halving, potentially positioning Bitcoin around $35,000 by the upcoming halving.

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