Why can’t half be fully priced in: Bitwise CIO

With Bitcoin (BTC) about to halve in hours, analysts clash over whether a four-year event has already been “priced” into the crypto market.

According to Bitwise CIO Matt Hougan, the answer is yes — but it comes with some caveats.

Bitcoin half and efficient markets

In a Twitter thread posted on Friday, Hugan acknowledged that the halving was both “popular” and predictable for all market participants.

Specifically, at block 840,000, the newly created BTC associated with each Bitcoin block drops from 6.25 BTC to 3.125 BTC, reducing the daily supply by 450 BTC per day.

Since this change has been coded into the network since its inception, the Efficient Markets Hypothesis (EMH) suggests that Bitcoin's current market value should already reflect this halving.

“I think this is broadly true,” Hugan wrote. “What the EMH people leave out, however, is that … current prices only reflect the market's estimation of future demand for bitcoin.”

Hougan's firm Bitwise is a sponsor of the newly launched US Bitcoin Spot ETF, which has raised more than $12 billion in net proceeds since launch.

Although the flow has stalled in recent weeks, as professional investors gradually embrace them over the next two years, Hugan previously predicted a second wave of demand for ETFs.

After the halving, the impact of the second wave on the price of Bitcoin may be more severe given the composition of sellers in the market.

Forced Seller VS Voluntary Sellers

As Hugan explains, Bitcoin miners — the first recipients of new BTC — are the only “forced sellers” of Bitcoin who can liquidate their BTC at any market price, given the high marginal cost of their business.

Miners' daily selling pressure will drop significantly after the halving, with a greater share of “willing sellers” who only sell when they want, and typically demand a very high price per coin.

“That's why I find half of it brutal,” concludes Hugan. “I think the market has underestimated the long-term demand for bitcoin, and I like the idea that that excess demand should only be chasing bitcoin from people who don't need to sell it.”

According to Google Trends data, searches for the term “Bitcoin Halving” have recently hit their highest levels, indicating a high level of excitement for the event.