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Not the Usual Halving: Goldman Sachs Warns Against Relying on Historical Price Patterns

Bitcoin halving 2024: why historical context shouldn’t impact current expectations

With the upcoming Bitcoin halving, Goldman Sachs cautions investors about expecting past patterns to predict future price movements, emphasizing the distinct macroeconomic environment.

Key takeaways:

  • Bitcoin's mining reward halving is imminent, reducing block rewards to 3.125 BTC.
  • Goldman Sachs highlights differences in macroeconomic conditions that could affect post-halving price movements.

Bitcoin is on the verge of its fourth mining-reward halving, an event that will slash the number of bitcoins awarded to miners per block from 6.25 BTC to 3.125 BTC. This significant reduction in new supply issuance has historically led to price increases, with the crypto community largely optimistic about a repeat performance. However, Goldman Sachs urges caution. In a client note dated April 12, the investment bank's Fixed Income, Currencies and Commodities (FICC) and Equities team articulated: 

"Historically, the previous three halvings have been accompanied by BTC price appreciation after the halving, although the time it took to reach the all-time highs differs significantly. Caution should be taken against extrapolating the past cycles and the impact of halving, given the respective prevailing macro conditions."

The financial giant pointed out that unlike previous cycles, today's economic landscape is marked by high inflation and interest rates, which contrasts sharply with the low-interest rates and expansive monetary policy that characterized earlier halvings.

Macroeconomic factors and their influence on Bitcoin’s future

Goldman Sachs notes that the current macroeconomic conditions are not conducive to the risk-taking seen in past Bitcoin bull runs. With U.S. interest rates above 5% and persistent inflation, the market dynamics have shifted considerably. 

 The note added:

"That's not the case today: Interest rates in the U.S., the world's largest economy, stand above 5% and markets have recently priced out hopes of cuts this year in the light of sticky inflation and a resilient economy,"

Despite these cautionary notes, Bitcoin has seen a substantial rally this year, attributed partly to the influx of capital into U.S.-based spot exchange-traded funds (ETFs). These funds have reportedly amassed $59.2 billion in assets under management since their inception three months ago, according to Bloomberg. This influx has created a demand-supply imbalance, possibly pulling forward much of the post-halving price surge typically expected.

Goldman Sachs concludes that while the halving serves as a "psychological reminder to investors of BTC's capped supply," the actual market impact will hinge more on ongoing demand for BTC ETFs and broader market dynamics rather than the halving event itself.