By Michael Scott
Bitcoin has recovered from Grayscale bleeding to realize a strong rally. The improvement is evident with spot Bitcoin ETFs amassing over 192,000 Bitcoin holdings by Friday.
The achievement is historic, given that the spot Bitcoin ETFs were only approved on January 10 by the US Securities and Exchange Commission (SEC).
Market analysts have recently stated that Bitcoin would realize a steady price increase following the halving event. They indicate that the slowing outflows from Grayscale will lower the selling pressure at a time when the community will develop increased interest in Bitcoin-based applications.
Ordinals Portray Revitalized On-chain Activity
Ordinals are leading with revitalized on-chain activity blended with bolstered fundamentals. The activity coincides with the buying demand witnessed by the spot bitcoin exchange-traded funds (ETFs), bound to support a price rally in the future.
The research note by the crypto asset manager Grayscale indicated that the Bitcoin (BTC) technical fundamentals and usage have significantly higher volume than in 2023. Such is making the largest crypto by market capitalization even stronger ahead of the halving event that observes forecasts to trigger a bullish outcome.
Grayscale researcher Michael Zhao indicated that fundamental on-chain activity will expedite the recovery from the short-term challenges confronting miner revenue. Besides, the existence of a favorable market structure is transforming the halving into an essential event.
Zhao indicated that the recent developments indicate Bitcoin evolving into a uniquely different and significant product beyond the initial profiling as a digital gold.
Halving involves a critical element within the Bitcoin network’s code integrated to create a supply crunch, thereby reducing the inflationary pressure. The halving lowers the Bitcoin units rewarded into half whenever they successfully mine the block.
The Grayscale note illustrates that the halving would make obtaining and mining additional Bitcoins harder. Such has historically preceded massive bull runs in the past.
Ordinals Bump Fundamentals
Zhao observed that discovering ordinal inscriptions blended with BRC-20 tokens portrays revitalized on-chain activity. The two yielded $200 million from transaction fees in February 2024.
The researcher added that the trend would persist as developers portrayed renewed interest and present innovations within the Bitcoin blockchain. The BRC-20 standard emerged in April, enabling users to leverage the network in issuing transferable tokens.
The tokens are identified as inscriptions and function within the Ordinals Protocol. The protocol enables users to embed data within the Bitcoin blockchain by inscribing references to the digital art within the small Bitcoin-based transactions.
A review of the network demand illustrates that fees earned from Ordinals were 20% of the monthly earnings for miners. Such illustrates that the fees constitute a new income source and a critical stakeholder for the network.
Bitcoin ETFs to Fuel Buying Pressure
Besides the positive on-chain fundamentals, the market structure of Bitcoins appears beneficial to the post-halving price. The report illustrates that lower rewards require lower buying pressure to keep prices afloat.
The scarcity in supply following the halving event likely triggers increased demand for Bitcoin to translate to higher prices. Zhao observed that bloc rewards have, in the past, introduced sell pressure. They create the possibility that the entire Bitcoin mined is sold, affecting prices.
A review of the rewards shows that 6.25 Bitcoin is earned for every complete block, translating to $14 billion yearly at a modest price of $43,000. Halving would decrease the buying pressure to $7 billion annually.
The halving is expected to lower the rewards per complete block to 3.25 Bitcoin, easing the selling pressure.
Spot Bitcoin ETFs are set to fuel the price rally, considering that over 192,000 were held by Friday. The funds have existed on the market since January 11 and are attracting billions of investors’ investments.
Market observers project more inflow as investors seek exposure to Bitcoin without the need to buy and store.