Goldman Sachs Warns that Previous Bitcoin Halvings May Not Indicate Future Price Trends

In just two days, the cryptocurrency world is preparing for a crucial event: the Bitcoin halving. This highly anticipated event will cut the reward for mining Bitcoin in half, from 6.25 BTC to 3.125 BTC per block, marking a significant milestone in Bitcoin’s history.

In the past, halving events have often led to extended price rallies, but investment giant Goldman Sachs warns against oversimplifying these trends. Their Fixed Income, Currencies and Commodities (FICC) and Equities team highlights the historical pattern of Bitcoin price appreciation after halvings, but they emphasize the need to consider the current macroeconomic conditions. Previous halvings occurred during a time of rapid growth in the M2 money supply of major central banks and near-zero interest rates, which encouraged risk-taking in financial markets, including cryptocurrencies.

However, the macroeconomic landscape today is quite different. We are currently experiencing high inflation and interest rates. Major central banks like the U.S. Federal Reserve, European Central Bank, Bank of Japan, and People’s Bank of China have seen significant increases in their M2 money supplies. This divergence raises questions about how the halving will impact Bitcoin’s price.

Despite these macroeconomic shifts, the price of Bitcoin has surged impressively this year, reaching record highs well before the halving. The influx of funds into U.S.-based spot exchange-traded funds (ETFs) has played a crucial role in this surge, with substantial assets under management accumulated in a short period.

Analysts have differing views on what will happen after the halving. Some believe that much of the expected surge has already been priced in, while others anticipate a pullback in the market following the event. Goldman Sachs sees the halving as a psychological reminder of Bitcoin’s limited supply but emphasizes that the medium-term outlook depends on the adoption of BTC ETFs.

As we approach the halving, the convergence of market dynamics and macroeconomic conditions sets the stage for a potentially transformative moment in Bitcoin’s journey.