Ahead of the halving, Bitcoin emerges triumphant, breaking new records as it skyrockets to an all-time high after its 2021–2022 dip. Leading AUM Grayscale, in its latest report, shed light on the dynamic trends and how they impact the sector at large. The dominant crypto made the fastest recovery from its brutal bear market compared to the prior two cycles. As per Grayscale’s analysis, Bitcoin is in the “middle innings” of another bull market, with prices continuing to rise.
In total, it took just over two years for Bitcoin’s price to return to its previous peak. By comparison, the recovery from the prior two drawdowns took approximately three years, while the recovery from the first major drawdown took about one and a half years.
While notching up an all-time high, BTC also posted a mid-month drawdown of about 13% due to reduced leverage and decreasing inflows into US-listed spot Bitcoin ETFs. For the entire month, net inflows into the US-listed spot Bitcoin ETFs totaled $4.6 billion, down from $6 billion in February, Grayscale noted.
Despite Fiat’s hegemony, there is still a growing market need for alternative value stores like Bitcoin. One potential driver of this demand is the indications from prominent central banks suggesting lowering interest rates. According to surveys conducted by Bloomberg, all G10 central banks except the Bank of Japan are expected to reduce policy rates over the coming year. Investor interest in Bitcoin’s qualities as a “store of value” asset is another factor contributing to the spike in demand for the cryptocurrency.
Bitcoin Halving Amidst Fiat Currency Volatility
Moreover, the upcoming Bitcoin halving [slated for April 19] will reduce the coin’s issuance by half and is typically seen as a positive factor for its price. From Grayscale Research’s perspective, investors tend to gravitate towards assets with this type of verifiable scarcity when they are uncertain about the medium-term outlook for fiat currencies.
Currently, this uncertainty appears to be mounting: the Federal Reserve is gearing up to reduce interest rates despite inflation persisting above its target, and the upcoming November election in the United States might prompt macro policy shifts that could exert downward pressure on the dollar’s value over time.