Thursday, April 18, 2024

a different halving narrative, HK ETFs, native tokenization, BTC weakness

“Freedom is not constituted primarily of privileges but of responsibilities.” – Albert Camus ||

Hello all! It’s almost the weekend, and almost the beginning of a new bitcoin cycle, with the halving expected tomorrow or Saturday. Below, I look at how bitcoin mining economics have changed, and at how that impacts one of the key halving narratives. Plus a few other interesting twists.

No audio today, apologies!

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IN THIS NEWSLETTER:

• What do interest rates and AI have to do with Bitcoin’s halving?

• Bitcoin halving countdown

• Hong Kong ETFs and Asian investors

• BTC weakness

• Native bond tokenization

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WHAT I’M WATCHING:

What do interest rates and AI have to do with Bitcoin’s halving?

With just hours to go before the Bitcoin halving, in which the amount of BTC awarded to miners for processing blocks drops by 50%, I want to poke at one of the key bullish narratives triggered by the event.

It’s this: the amount of new BTC entering the market via miners is cut in half, which should reduce selling pressure.

But this assumes that miners sell all their BTC – if the new BTC didn’t make it to market in the first place, then the sell pressure hasn’t really changed.

Of course, it’s more complicated than that, especially these days. But the narrative of a lower sell pressure feels much less relevant this cycle than at previous inflexion points.

(For background, in Saturday’s newsletter, I wrote about whether or not the halving was priced in.)

To preface, I do believe the halving is a positive influence on the BTC price, but not so much for the flow dynamics as for the marketing effect (“halving? bitcoin? I must find out more!”). On the negative side is the potential miner overhang.

In Bitcoin’s early days, miners pretty much had to sell most or even all of their mined BTC in order to cover operating costs. Most were in China with access to cheap electricity, which is just as well as BTC was less than $13 at the first halving in 2012, under $600 at the second in 2016. True, there was less competition back then, so miners earned more BTC – but machines were less efficient and operations more bootstrapped.

The below photograph, taken at a Scaling Bitcoin conference in Hong Kong in 2015, shows more than half of the network’s mining power on stage.