In markets, this time is almost never different. This Bitcoin halving is different.

Guest blog by Nathaniel Whittemore (NLW)

NLW is the host of Coindesk’s The Breakdown – the fastest-growing podcast in crypto. Whittemore has been a VC with Learn Capital and was on the founding team of Change.org

The views and opinions expressed in this article are those of the author and do not necessarily represent the views or opinions of Kraken or its employees. 

Each Bitcoin halving is the same in that they all reduce the block mining award by half. This common dynamic has led to similar patterns of BTC trading following past halvings.

Still, the current narrative surrounding Bitcoin – along with the structural forces driving the BTC market – are unique this time around.

The growing consensus: Bitcoin is here to stay

In the lead-up to every previous halving, the main question was whether Bitcoin would survive at all. If there was a previous bull cycle, was it a fluke? Was the last all-time high just a speculative mania before a crash to zero? By a large margin, the consensus across financial markets is that Bitcoin is here to stay as an asset class.

Following SEC approval, several Wall St. firms are now offering Bitcoin ETFs. Global regulatory schemes are being rolled out. The Bitcoin network has been cryptographically securing value for 15 years and Kraken celebrated its 12th anniversary. 

This is an industry building on a solid foundation. Markets are beginning to understand that Bitcoin is a permanent technological advance – a monetary innovation that can’t be undone.

The tradfi inflow has begun

With increased credibility has come increased institutional confidence and understanding. Hedge funds and asset managers aren’t being taken by surprise by the halving. During the last halving, in May 2020, there was very little interest in Bitcoin until Paul Tudor Jones began singing its praises. 

The legendary hedge fund manager warned about currency debasement and called Bitcoin “the fastest horse in the race.” That was the week before the last halving.

The bull market that ensued was frenetic but it got off to a relatively slow start. It took Bitcoin six months to double following the halving. Traditional investors still openly scoffed at the idea of adding Bitcoin to a diversified portfolio.

Heading into this halving, and especially with the debut of 11 BTC ETFs, institutional investors are pouring billions into Bitcoin. They’re not waiting around until after the halving to see if Bitcoin is real. Allocations are being bought in anticipation. Putting Bitcoin on a corporate balance sheet is no longer a weird gimmick, it’s now a viable treasury strategy.

The first halving near an all-time high

The biggest reason that this halving is different is the Bitcoin price. Bitcoin is already up 300% from its sub-$16,000 price in November 2022 at the depth of crypto winter.* We head into the halving close to its all-time high, a level that has never coincided with a halving before. Not even close.

Following the previous two halvings it took Bitcoin seven months to reach new all-time highs. The halvings themselves were anticlimactic. Each time, Bitcoin remained stubbornly stagnant immediately afterward while everyone wondered if another bull market would ever arrive. This time around, Bitcoin has been rallying for several months already.

A pivotal milestone: New Bitcoin supply scarcer than gold’s

Each halving is much less impactful on the Bitcoin market in terms of supply reduction than the previous one. When Bitcoin went through its first halving in 2012, less than half of the Bitcoin supply had been mined. The block reward was cut from 50 bitcoins to 25 bitcoins. Bitcoin went from adding 25% to its annual supply to 12.5%, overnight.

During this halving, the vast majority of the Bitcoin that will ever exist has already been produced. Just 1.7% annually is added to the total bitcoin supply. But reducing that rate to 0.85% is a watershed event, as there will now be a larger percentage of gold added to the total gold supply every year than there will be bitcoin added to the bitcoin supply.

Annually, newly mined gold adds 1% or more (3% was added in 2023) to gold’s total supply. So even gold – once the global standard for store of value due to its scarcity – joins the long, long list of assets with more value-diluting supply inflation vs. Bitcoin. No other asset – none – has a perfectly finite supply. There will never be more than 21 million bitcoins.

In markets, this time is almost never different. This time is different.

For the first time before a halving, Bitcoin is widely available via ETF and increasingly accepted as a new, permanent asset class. Traditional finance has only just begun to buy bitcoin. Bitcoin’s market cap trades at a tiny fraction – around 8% – of gold’s, even though it’s a demonstrably superior store of value. The new supply added annually to existing Bitcoin will be cut to a trickle, just 0.85%.

As we move into an era in which $300T of professionally managed tradfi AUM begins to adopt Bitcoin as a permanent asset class – just as its newly minted supply dwindles toward zero – there’s every reason to believe we are much closer to the very beginning of the Bitcoin revolution than the end.