BlackRock’s iShares Bitcoin Trust, trading under the ticker “IBIT”, has seen 69 straight days of inflows, coinciding with the fourth Bitcoin halving event. The halving, which occurred at block height 840,000, resulted in a decrease in the mining reward from 6.25 to 3.125 bitcoins. This reduction is part of a strategy to limit the total supply of Bitcoin to 21 million and increase its scarcity by halving the influx of new coins into circulation. Despite a slowdown in Bitcoin ETF inflows, data from Farside Investments shows that flows are once again gaining momentum in the wake of the bullish halving event.
The recent geopolitical tension in the Middle East, particularly the conflict between Israel and Iran, has impacted the Bitcoin price. Last week, Bitcoin experienced a sell-off and increased volatility due to the military situation in the region. Historically, Bitcoin has been seen as a hedge against global uncertainty; however, the conflict led to a strengthening of the U.S. Dollar, as investors sought safety. Portfolio managers reduced exposure to high-volatility assets like Bitcoin to decrease portfolio volatility in the face of geopolitical uncertainty. This macro-driven price impact on Bitcoin is largely attributed to Bitcoin ETF trading rather than crypto-native trading.
According to Basile Maire, co-founder of D8X, Bitcoin prices have been influenced by macro events such as the Dollar strengthening and flight-to-safety. The introduction of ETFs has enhanced the impact of macro events on Bitcoin prices. While the short-term impact of political events on financial markets is significant, the potential for Bitcoin to serve as a hedge against long-term global uncertainty remains intact. Despite the sharper declines experienced by cryptocurrencies compared to traditional assets during geopolitical turmoil, Bitcoin still holds value as a diversification tool in investment portfolios.
Overall, the trend of inflows into BlackRock’s iShares Bitcoin Trust reflects growing interest in Bitcoin following the halving event. The limited supply dynamics of Bitcoin, driven by the halving process, contribute to its scarcity and potential for value appreciation over time. While short-term market fluctuations can be influenced by geopolitical events or macroeconomic factors, the long-term investment thesis for Bitcoin as a digital asset with a finite supply remains compelling. As the cryptocurrency market continues to evolve and adapt to external forces, Bitcoin ETF trading and institutional interest are likely to play an increasingly important role in shaping its price movements and adoption.
