Bitcoin’s performance will depend more on macro factors than supply reductions – Wells Fargo
Bitcoin's performance heading into its next halving cycle will depend less on supply reductions and more on factors such as adoption, investor demand, regulation, and the broader macroeconomic environment, according to Wells Fargo Investment Institute.As Bitcoin's next halving approaches in April 2028, Harsh Agarwal, global strategist, noted that while the event has historically coincided with strong price appreciation, the impact of each successive halving appears to be diminishing as most bitcoins have already been mined, the market has grown significantly larger, and institutional participation has increased.By the 2028 halving, more than 96% of Bitcoin's total supply will have been issued, further reducing the direct supply impact of the event, Agarwal stated."Each successive halving reduces the supply of new coins by a smaller amount than the one before it," he said, and emphasized that Bitcoin's halving is a pre-programmed feature that cuts the reward miners receive for validating transactions by 50%, thereby slowing the creation of new bitcoins.Historical data shows that post-halving gains have declined substantially over time. Bitcoin appreciated approximately 92.1 times following the 2012 halving, 29.3 times after the 2016 halving, 7.8 times after the 2020 halving, and just 1.9 times following the 2024 halving to date, according to Wells Fargo data."Cycle gains have fallen from roughly 92x during the 2012 cycle to less than 2x in the current cycle, while peak-to-trough declines have narrowed from about 84% to 53%," Agarwal noted.The investor base has also changed considerably, he added."Early Bitcoin cycles were driven primarily by retail investors trading on lightly regulated platforms, with limited institutional participation and few established investment products," he said. Today, Bitcoin exposure is available through regulated exchange-traded products and traditional brokerage accounts, while institutional ownership has become increasingly common."A larger and more diversified ownership base may potentially result in a more stable market," he concluded, adding that this trend may help reduce both extreme advances and extreme declines while making the extraordinary returns achieved during Bitcoin's earliest cycles increasingly difficult to replicate.Content provided by Seeking Alpha is intended for information purposes only, and that Seeking Alpha does not offer any personalist investment advice and is not a licensed securities dealer, broker, US investment adviser or investment bank.