đHow Bitcoin ETFs May Mitigate BTC's Price Volatility Before the Halvingđ°
Bitcoin's halving, occurring roughly every four years, often accompanies a price downturn. This time, speculation surrounds whether the introduction of spot Bitcoin exchange-traded funds (ETFs) could alleviate this dip compared to previous halvings.
The 2024 Bitcoin halving, set for April 20, marks the fourth in Bitcoin's history. These halvings aim to decrease the supply of new BTC, ensuring its scarcity.
Here's a simplified overview of the five stages of a halving:
1. Pre-halving downside phase: Investors anticipate the event, causing bearish price movements.
2. Pre-halving rally: Prices surge as short-term investors capitalize on the hype.
3. Pre-halving retracement: Prices dip again as investors anticipate sell pressure.
4. Reaccumulation: Prices stabilize post-halving as hype subsides, and investors exit positions.
5. Parabolic uptrend: Bitcoin prices surge to new all-time highs.
Now, let's focus on the third stage, the pre-halving retracement, where Bitcoin ETFs could play a crucial role.
Since the approval of 11 Bitcoin ETFs, institutional demand has surged. On March 4, global Bitcoin exchange-traded products surpassed 1 million $BTC in assets under management (AUM). Additionally, on March 5, these products reached a record $10 billion in trading volume, indicating increasing interest.
Many believe this heightened demand for Bitcoin ETFs could serve as a hedge against falling prices during the pre-halving retracement. How?
During the third and fourth stages of a halving, we typically witness declining BTC prices as investors exit positions, potentially leading to reduced demand. However, Bitcoin ETFs could counter this trend by attracting institutional investors seeking portfolio diversification.
Note: If demand for ETFs diminishes, they could increase selling pressure rather than alleviate it.
Only time will reveal whether ETFs will significantly impact the halving stages.
