Institutional Top of Mind #20

This edition's Top of Mind with 10x Research covers how the recent Bitcoin halving may have mitigated the typical post-launch sell-off, the shift towards a HODL strategy among large Bitcoin miners, and the positive impact on Bitcoin's price due to reduced supply pressure.

TL;DR

Halving Impact on Post-Launch Sell-Off: The halving event may have prevented the typical sell-off that usually follows the launch of new Bitcoin products.

HODL Strategy by Large Bitcoin Miners: Larger Bitcoin miners are increasingly adopting a HODL strategy, reducing the usual post-halving sell pressure.

Change in Miners' Selling Behavior: Traditionally, miners sell Bitcoin to fund their operations. However, recent on-chain HODL data and statements from companies like Marathon Digital suggest a shift away from this behavior.

Positive Market Impact: The reduction in the number of miners selling Bitcoin is expected to positively impact Bitcoin's price by decreasing the overall supply pressure in the market.

Over the years, four distinct Bitcoin products have been introduced to regulated financial markets, typically leading to significant price increases. On average, Bitcoin prices have surged by 150% leading up to these launches. Although returns have diminished over time, the launch of Bitcoin Spot ETFs in January 2024 still sparked a 70% rally in the 100 days preceding the listing. Notably, the tendency for large post-launch sell-offs has decreased, likely because previous listings often coincided with market cycle peaks.

Despite the 70% rally being the smallest among the four product launches, the sell-off following the January 2024 Bitcoin Spot ETF listing was the least severe, and Bitcoin's performance 100 days post-launch was the strongest compared to previous listings. In contrast, the introduction of Bitcoin Futures ETFs and the Coinbase IPO saw significant price declines immediately following their launches. The Bitcoin Spot ETFs stand out as the only products where prices were higher 100 days after launch, suggesting that January 2024 was not near a market cycle peak.

Exhibit 1: Bitcoin performance around product launches (-100 to +100 days)

The Bitcoin price rally from $46,000 at the time of the January 2024 ETF launch to $73,000 two months later supports this view. Earlier Bitcoin futures products did not attract significant assets under management relative to Bitcoin's market capitalization, leading to post-launch sell-offs once the initial hype subsided. However, in 2024, Bitcoin Spot ETFs showed characteristics of steady inflows with billion dollar inflows spread over many months. This helped prevent Bitcoin from experiencing the typical post-launch sell-off. Despite the fatigue after rallies, Bitcoin's overall trend has continued upward.

This trend may continue, influenced by potential political changes affecting regulatory oversight and the interest of three US public pension funds in adding Bitcoin to their portfolios. Despite the general understanding that Bitcoin consolidates after halvings, historical precedents suggest a rally is likely.

For example, the 2012 halving rally began about 40 days post-halving, the 2016 rally about 100 days later, and the 2020 rally around 150 days later. This delay could be due to miners selling hoarded Bitcoins to stabilize revenues, preventing Bitcoin from rallying after the halving. Indeed, on-chain wallet activity shows that smaller miners have been actively disposing coins after the market. With the broad acceptance of Bitcoin on Wall Street, larger listed Bitcoin miners have continued to build their Bitcoin inventory. The mining community seems committed to HODL and adopting a strategy similar to MicroStrategy's, becoming a proxy for Bitcoin's price rather than focusing on excelling through operating leverage.

The robust pre-halving rally in 2024 indicated that market participants positioned themselves for a post-halving surge. In fact, Marathon Digital recently announced that it purchased $100 million worth of Bitcoin. The company has committed to adopting a full HODL strategy, deciding to retain all the Bitcoin it mines on its balance sheet. This purchase has increased Marathon Digital's total Bitcoin holdings to over 20,000 BTC, worth approximately $1.3 billion.

The halving may have prevented the typical post-Bitcoin product launch sell-off. Additionally, with larger Bitcoin miners adopting a HODL strategy, the usual post-halving sell pressure has likely diminished significantly. Traditionally, miners are natural sellers of Bitcoin to fund their operations. However, if this trend changes—as indicated by on-chain HODL data and Marathon Digital's recent press statement—a substantial group of sellers will have exited the market. This shift should positively impact the Bitcoin price.

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