From ETFs to Halvings: Unpacking Bitcoin's recent price rally

Bitcoin prices have witnessed a remarkable surge recently. After bottoming out on September 11th, the price has appreciated by 42%, reaching a 2023 peak of $35,109 on Tuesday, October 24th at 2AM GMT+1. Let’s look at the factors that may be driving this bullish sentiment in the Bitcoin market.
 

Why the increased interest in Bitcoin? 

Two primary reasons account for the heightened enthusiasm around Bitcoin: 
 

1. Introduction of an ETF in the USA: An Exchange-Traded Fund (ETF) for Bitcoin is likely on the horizon for the USA. This development will facilitate easier Bitcoin investments for the average individual. Moreover, it will enable funds with risk-taking mandates to readily invest in Bitcoin, potentially accelerating its growth. 

2. The Bitcoin Halving: The Bitcoin halving is a process where the mining rewards are halved. Historically, Bitcoin's price tends to surge approximately six months prior to a halving and remains bullish for a year or two post the event. With the next halving slated for April 24th, investors are optimistic, hoping history will repeat itself. 

Understanding the Bitcoin Halving 

The halving is a mechanism that reduces mining rewards by 50%. For instance, on 11 May 2020, the reward was slashed from 12.5 to 6.25 Bitcoins for each validated transaction. In the upcoming halving, this will further reduce the reward to 3.125 Bitcoins. 
 

Every Bitcoin transaction requires validation, ensuring that the sender possesses the Bitcoin they're transferring, and that the recipient gets the expected amount. Miners facilitate this and are compensated with freshly minted Bitcoins. Over time, as the reward diminishes, fewer Bitcoins will be introduced into the market. This is in stark contrast to traditional fiat money systems, where central banks have the discretion to print more money. 
 

By 2140, all 21 million Bitcoins will have been mined, ceasing its production entirely. As of January 2022, 18.8 million Bitcoins have already been mined, constituting 89.52% of the total eventual supply. 
 

Bitcoin Price Trends Surrounding Halvings: A Table 
 

Source: ThinkMarkets and TradingView price data 

Technical Analysis of Bitcoin Prices 

From a technical standpoint, Bitcoin's price trajectory has shifted dramatically. In the past day, it surpassed its summer 2023 peak of $31,945. Coupling this with an upward trend line starting from the December 2022 lows and passing through the September 11th dip, an ascending triangle pattern emerges. This suggests a potential rise to $42,600 per coin, provided the price sustains above the September 11 low of 24,837. 
 

Historically, year-end has favoured bullish stock markets and risk assets. Given the strong correlation between the Nasdaq 100 (NAS100) and Bitcoin (BTCUSD) prices, Bitcoin's trend seems bullish. However, with major companies like Alphabet, Microsoft, and Snap releasing earnings reports on October 24th, and Meta on October 25th, market reactions remain to be seen. While a substantial drop in the Nasdaq 100 might dampen Bitcoin's momentum, the overall trend remains positive. For traders, the key benchmark is the September 11th low of 24,837; as long as prices remain above this, the bullish trend is likely to persist. 

BTCUSD Weekly Chart 

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