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While past halvings were correlated with price increases, current economic conditions could disrupt this historical pattern, Goldman Sachs said in a recent note to clients. According to the bank, factors such as inflation and interest rates could affect how Bitcoin reacts to this halving cycle.
Historically, the price of Bitcoin increased significantly after the three previous halvings, although it took some time to reach new all-time highs. Goldman Sachs warns against assuming the same price rise will happen again this time.
“Care should be taken to extrapolate past cycles and the impact of a halving, given the respective macroeconomic conditions,” the bank advised.
The central argument is that macroeconomic conditions are no longer the same. Current economic factors, such as inflation and high interest rates, are different from previous halvings, when the money supply was high and interest rates remained low, favoring riskier investments like Bitcoin.
Today, U.S. interest rates remain above 5% and recent data suggests the path to meeting the Federal Reserve's inflation targets will be longer than expected.
Bank of America has noted There is a risk that the Fed will not cut interest rates until March 2025, although it still expects a rate cut in December.
Supply and demand will determine the long-term outcome
According to Goldman Sachs, short-term price action around the halving may not significantly affect the price of Bitcoin in the coming months. The bank believes that supply-demand dynamics and growing interest in Bitcoin ETFs will be a bigger factor than the hype halving.
“Whether next week's BTC halving turns out to be a 'buy the rumor, sell the news' event arguably has less impact on BTC's (medium term) outlook, as the BTC price performance will likely continue to be driven by said demand dynamics and continued demand for BTC ETFs, which, combined with the self-reflexive nature of crypto markets, constitute the primary determinant of l. “spot price developments,” noted Goldman Sachs.
A recent report from Bybit predicts that exchange reserves could run out of Bitcoin within nine months. This shortage fear comes ahead of the Bitcoin halving, which will halve the new Bitcoin created per block.
On the other hand, demand is increasing. According to Bloomberg, recently launched spot Bitcoin ETFs have raked in an incredible $59.2 billion in assets under management in just three months.
Bitcoin's rally could be ahead of schedule due to the arrival of spot Bitcoin ETFs in the United States, according to a recent report from 21Shares.
Previously, Bitcoin typically took around 172 days to surpass its previous all-time high (ATH) and 308 days to reach a new cycle peak after the halving event. However, this cycle is different. Bitcoin already established a new ATH last month, unlike previous cycles where it typically traded 40-50% below its ATH in the weeks leading up to the halving.
Bitcoin is currently trading at around $61,300, down around 3.5% over the past 24 hours, according to CoinGecko data. The planned event is only two days away.
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