The Short- and Long-Term Impacts of the #Bitcoin Halving

The Short- and Long-Term Impacts of the #Bitcoin Halving

welcome to NASDAQ trade talks I’m Jill
mandrino Global markets reporter at
NASDAQ joining me for the segment we
have Steven Lupa head of private clients
at Swan Bitcoin Matt Balin swag managing
director at bitco and Austin Alexander
co-founder of layer 2 labs they join me
to discuss the short and long-term
impacts of the Bitcoin having and why it
is a critical part of bitcoin’s
programmatic monetary system gentlemen
it’s great to have you back as always
thanks for joining us to give us you
know the follow through from what we’ve
seen with the Bitcoin having um Matt and
I’d like to kick it off with you um
having really isn’t just about the price
at where Bitcoin is there you know there
are short and long-term patterns
associated with
this yeah that’s right thanks for having
us on Jill always a pleasure to uh to
see you I think that’s right you know in
terms of thinking through you know the
having and and what the implications are
on the broader Market obviously there’s
you know there’s people always think
about price but I think you need to
think about these things in really two
lenses there’s the short-term immediate
impact and then there’s the long-term
what happens you know in the short term
the the having tends to be pretty muted
um you know if you think about just the
math here there are now 3.125 Bitcoin
mined every block less than you know
before the having and so that’s about
450 Bitcoin per day which on a daily
basis is not enough to really impact
pricing and liquidity in the market and
shouldn’t have really a huge impact on
the immediate price action ction and
even with that right miners actually
might need to make up for the fact that
they’re earning less Revenue per block
now and so they might even be selling
some of their existing inventory and
working capital on the market to
generate some excess cash in the short
term so short term you know my guess
here is this is actually probably
somewhat of a nothing Burger a little
muted maybe a sell the news event now
that being said when you think about
this long term right 450 Bitcoin per day
turns into roughly 165,000 BTC per year
uh that’s 12 billion dollar or so of net
less Supply on the market and when you
think about that relative to the new
demand that we’ve just seen from the
nine new ETFs that launched earlier this
year that’s $25 billion at a minimum uh
pressure on price over that period of
time and that’s not accounting for new
demand so I do think longterm you’re
going to see some meaningful price
appreciation of Bitcoin um post having
and if you just look at history right
over over a one month period following
the three previous
down 10% plus 6% in each of those
periods but then if you zoom out and you
look at the following 12 month periods
after the three last hings in 2012
Bitcoin appreciated 8,800 per in 2012 uh
285 per in 2016 and 548 per over the
over the year after the 2020 having so
it just shows the the kind of spectrum
between you know short-term um you know
markets and and long-term markets yeah
so I I’m sorry good awesome so I I
definitely agree with Matt there this is
much more of a mid to long-term impact
you the numbers work out he did a great
job uh highlighting those but it’s about
$30 million a day at current prices that
is not being sold per day so over one
day two day a week it’s not really that
big of a deal but over a month like you
know he was highlighting a month is a
billion dollars a year is 12 billion if
you had a new buyer who had they were
guaranteed to do what they said and they
came out to the market today and said
hey we’re going to buy a million dollars
every month for the next four years
you’d be pretty bullish right that this
buyer and that’s effectively what we see
with the having over this long run so
the effect definitely plays out there
and that’s the me that’s what I like to
call the mechanical impact of the having
so what the code actually does is that
Supply issuance reduction however
there’s this other kind of more socially
mediated impact which is that Everyone
likes to report on the having as
evidenced by we’re here having this
conversation right now and there’s been
a lot of these conversations being had
and so what does that do it puts Bitcoin
in front of a lot of new people now what
is the fundamental driver of price in
any asset not just Bitcoin the
fundamental driver of price is people
clicking the buy button like period
that’s that’s the only thing that moves
asset prices models don’t move asset
prices cash flows don’t move asset
prices people people buying assets
because of those things moves asset
prices and so with the having you have
this secondary impact where it’s a it’s
a it’s it’s like bitcoin’s built-in
marketing and a lot of people see it
they learn more about Bitcoin we get
millions of new users and that is
bullish for price so you have this kind
of guaranteed mechanical impact and then
you have this reflexive social
layer right and Austin what about the
impact of the ETFs that have come out
especially you know this year know that
we have a spot Bitcoin ETF in the us and
we’re continuing to see institutional
adoption that that variable wasn’t
around the prior three having do you
think that’s going to you know that
variable is going to mean anything in
the longer
term yeah I’m probably I’m sure it’s
going to mean something in the longer
term I just like to say you know very
well articulated uh description of the
having and the effects by Matt and
Steven uh yeah I mean it really opens up
the this asset to a a new market um you
know that indifferent uh uh average
investor that see prior to this to
acquire Bitcoin you had to go to a uh
specific exchange like Swan or Kraken
and there were just even even if there
were very uh slight um barriers to entry
uh it it it presents some friction for
for the average you know somewhat
interested but perhaps in different um
investor and with the ETF it’s uh one
button to click in their platform where
they’re likely have been clicking
buttons for the last 20 years since
online trading began um so I would say
the effect is probably uh going to help
amplify the upside but maybe in the long
maybe you know when the when the when
the market corrects it might we might
see some amplification of the downside
uh I guess that remains to be seen and
then recently we’ve heard uh news of a
new ETF in Hong Kong that’s going to
begin trading at the end of this year
and obviously all these things I said
about uh friction for that average
consumer in the US are even more
Amplified in in the East um hopefully
maybe someday there’ll be some uh
vehicle there’s vehicles that exist uh
we haven’t yet heard if the Hong Kong
ETF will be one of these for mainland
China uh uh broker customers to access
that that um asset as well
yeah it seems to be Hong Kong is is the
proxy for mainland China at this point
yeah and the and the interest out of
I’ve been in Hong Kong a couple times in
the last um few months the interest in
uh this current bitcoin uh narrative the
Bitcoin layer 2 narrative um and these
uh these new protocols being built on
bitcoin I would say it’s about 10 times
higher than it is in the west although
the West is starting to catch up now and
you’re starting to see Western VCS
looking to get into this but um I’d say
for this particular cycle what’s
happening right now Hong Kong is and and
and and I I assume um Asia in general is
is kind of leading the the charge
currently yeah and I think um the
relationship between the ETFs and the
having is is kind of an interesting one
because we’re in this scenario where
we’ve had a on net the ETF says a
complex are have pretty much mostly been
buyers there’s a few days and but I mean
if you factor gbtc out of that they’ve
pretty much always been net buyers I’m
sure that’ll change at some point on
some days
but the trend seems to suggest that on
average they buy more coins than they
sell and so you have this kind of
consistent increase in buy volume which
only get ramped up when there is a a
catalyst or there is uh you know some
sort of spark that causes investors
traditional investors to want to own
more Bitcoin and then it’s it’s meeting
this kind of um this issuance reduction
and you know my basic view of markets is
that’s
not additive it’s it’s multiplicative
right when you have an increase in buy
pressure at the same time you have a
decrease in in sell pressure it’s not 1+
1 equal 2 it’s 1 plus 1 equals 4 there’s
a kind of a like a added effect that
comes there and so I think seeing the
ETFs at the same time that we have the
having this year it wouldn’t surprise me
at all to see an outsized impact
relative to the
Past yeah and I I would add to that too
just to say that anecdotally you know
we’re what’s as um you know um I’d say
interesting as the flows themselves uh
is is really the of conversations I
think at least bito is having now with
institutional interested parties that
just were not at the table prior to the
kind of issuance of the new ETF so we’re
talking to you know some of the largest
Sovereign you know wealth managers in
the world we’re talking to endowments
we’re talking to now a whole new
universe on the um you know investment
advisor side of of you know the
institutional community so when you when
you think about the total addressable
Market of these kinds of investors um
you know the forecast potential inflow
is just massive into the asset class so
it’s super encouraging to now see a lot
of Market participants having
conversations with us on the ground that
just were not here in the last two years
Matt what about the miners though
because isn’t this going to impact the
calculus of their
model yeah so from a you know from a
Minor’s perspective um you know I think
again you kind of look at this again
shortterm and long term so what tends to
happen here is almost this like
darwinian effect on the ecosystem right
you have have some of the smaller miners
that have the outdated equipment um you
know that weren’t as profitable and now
when you have this reduction in Revenue
um you know it puts it puts stress on
their operating model and so you know
they’re forced to try and weather that
storm hope hope that BTC price um you
know appreciates over time such that the
revenue catches up to their cost
structure but in a lot of cases it
doesn’t go that way and so a lot of the
smaller miners either actually take
their equipment offline and stop mining
or they get acquired by some of the
bigger players out there so typically
after a having you see a lot of
consolidation and and m&a activity in
the sector um you know some of the
bigger public companies and and bigger
miners out there that have these
state-of-the-art fleets uh that have
access to Capital and financing
arrangements with lenders um you know
they take advantage of the situation you
know their I think their immediate
Revenue gets hit but they right they’ve
kind of bolstered their balance sheet to
the point where they can sustain this
event and now actually capitalize on it
by you know accumulating some smaller
shops or updating their fleets and just
kind of prep preparing for the next
cycle all over again so you know I think
you’ll start to see that similar Trend
play out here in terms of just
consolidation um but in the short term
you will see some stress on on some of
the smaller
miners I think also it’s important for
people in this market to understand that
you know the 21 million coin limit is
probably like the
fundamental um value proposition of
Bitcoin and so uh you know we need the
issuance to stop eventually and that’s
the the having is kind of the mechanism
to Trail off the the issuance of new
Bitcoin however um as that mining uh
what we call the mining subsidy uh
decreases gets cut in half every four
years uh the network relies on
transaction fees ultimately to
to fund the the miners to keep moving
the chain forward and so in the long
term maybe not um you know we’ve only we
this we’re only the fourth having in out
of I think it’s 34 so there’s a 100
years left of having but we’re very near
to I forget something like 95% of all
coins being issued and so it’s uh you
know it’s important to note that the
network is in short order going to
become uh extreme much much much more
reliant on utility utilization
transaction fees to to fund the the
miners to push the chain forward um
however we’ve seen in the in the days
following this having in particular an
absolute explosion in transaction fees
fueled by uh people kind of
experimenting with novel uses of of the
blockchain um this particular uh
experimentation around um nfts and and
uh ordinals on bitcoin maybe it it
doesn’t have staying power but um we
definitely need to as you know as an
industry uh and as investors in this
asset class discuss ways to scale
Bitcoin so that we can aggregate much
more transaction volume um onto the
chain uh I’m super bullish for you know
a decade plus uh completely 100% Allin
bullish uh like a crazy person however I
think you know if we don’t scale um we
don’t do something to scale Bitcoin I
mean to bitcoin status quo today without
any further scaling modifications of
course it’s worth a million a few
million of coin the value proposition
seems crystal clear to me however we
want Bitcoin to fulfill its uh ultimate
potential as being the kind of
foundational Network for all
transactions in the entire global
economy we need uh some sort of scaling
that um I believe Aggregates in a
decentralized dynamic way and not just
to scale through custodians although
it’s you know Bitcoin that’s a perfect
segue Stephen for a question that that I
want to bring up with you um it seems to
be there’s these discernable moments
such as we see institutional adopting
then we see um you know ETFs becoming
available in the US via a spot product
there seems to be these very discernable
moments like having as an example so not
suggesting digital assets are anything
like equities or Commodities but at
least with equities there’s earnings
every quarter and there are events that
you know change the fundamentals of a
stock right so what’s going to be next
like what you know it’s not like you
earnings every quarter for Bitcoin so
you know piggybacking on what Austin
said H how is this going to continue to
grow outside of product Innovation
outside of having events yeah that’s a
great question I think it’s one that
many people before they kind of get into
the industry or get into the asset class
I think it’s one of the top questions of
like well how do you value this thing
what gives it value it doesn’t have cash
flows it’s not a company and you it’s a
very valid question um I mean ultimately
bitcoin’s price right now is driven
by adoption it’s driven by people seeing
value in what it gives them now the main
function it serves right now is as a
store of value or as a savings
technology and so people might see that
as like oh well that’s that’s not really
utility like that’s not a use case but I
mean that is a use case right like if
you live in a country where if you sell
a piece of property and your only option
is to hold it in their currency or their
stock market and this is an inflationary
economy with a weak stock market and
like let’s be clear like the US Stock
Market has been the best performing
stock market in the world for a long
time and literally everything else has
performed worse than it substantially
you you have a savings problem and
having a a vehicle in a medium where
both you can save value and also that
value is not prone to confiscation it’s
not prone to certain risks you can
transact with that value globally well
that is something a lot of people find
utility in so so that is a use case and
that is something that year after year
globally more people choose to use
Bitcoin to store part of their wealth um
and the more people that do that the
more Bitcoin is worth uh in the same way
you might value gold right like gold
does not have cash flows but gold is
worth trillions of dollars why why is
gold worth millions of dollars it’s not
the industrial use cases it’s not
jewelry if that’s all gold had it would
be a 90% lower valuation than where it’s
at it has value because globally humans
use it to store monetary savings and
Bitcoin is a novel uh and I would even
say a revolutionary breakthrough in the
ability to do that now will other things
happen will people use it as a payment
network will people use it to build
other Technologies I’m sure these are
things that happen right and those
things reinforce bitcoin’s value
proposition but it has a very strong
value proposition independent of those
forces okay and at couple minutes here
will give you the last word yeah I would
I would 100% agree with uh with Steve’s
interpretation there I think the value
of Bitcoin lays in the Public’s
perception of what it can be uh and
Steve did a great job kind of laying out
right the fundamental value proposition
of Bitcoin and that it’s a non-sovereign
storeold of wealth that is an
internet-based asset and is fully
decentralized that’s just something
we’ve never had as a society um and I
think you know what are going to be the
near-term catalysts right if there’s no
earnings and there’s no you know it’s
not like there’s another having you know
happening in the next few months so I
think the catalysts just stem from that
adoption curve really compounding and
escalating as people understand and are
educated about the value prop of Bitcoin
that they will then be able to empower
and educate more people so you’re going
to see this
exponential understanding um you know
and interpretation of Bitcoin and and
what it actually means I think globally
um and then if you just look at kind of
what’s happened now in the last few
months with the with the new issuance of
the nine new ETFs you know we’re getting
ambassadors whether it’s Larry fin or
Abigail Johnson from Black Rock
infidelity speaking about the same
things that Steve and I are speaking
about right now and so the more educated
and empowered people really spreading
kind of the Gospel of of Bitcoin I think
that is what will lead to its its you
know full potential price appreciation
and those are going to be the catalysts
you know and then when you get these big
Investments you know investment advisers
or hedge funds or endowments or
sovereigns actually adding Bitcoin to
their portfolios and going on the record
and saying we’re actually owning this as
an asset class in an Institutional
portfolio that will be like a a chain of
dominoes um and it’ll go from one one
pension or endowment to the next so I
think those are going to be the things
that that actually take this to the next
level over the next few years and let’s
be clear just one detail to add the ETF
story is less than 5% done like it it it
has not played out they have not fully
deployed their marketing budgets they
have not completed all the conversations
they’ve had they have not completed
their addition of these ETFs to other
portfolios and other products that
Fidelity and black rock serve um most
Financial firms like you still can’t buy
the ETFs there they’re still rolling
them out they’re in non-solicitation
Clauses advisors can’t talk about it you
can’t own it in an advisory account like
the story is not done like what is the
next Catalyst it’s the ETFs it’s still
the ETFs like this has not played out
yet yeah all right Austin 30 seconds I
promise 30 seconds at the end of the day
it sounds like scale just like any other
way you’d you know look at fundamentals
for a company a digital asset and so
come it comes down to
scale um yeah and Bitcoin obviously is
of any digital asset is by far the
largest scale um and we’re it’s Crystal
Clear now that uh capital of All Sorts
all over the world of all types is
intrigued at the very least um it’s
still almost surreal just to know that
there’s a sovereign state where Bitcoin
is legal tender um they’re probably a
decade uh too early let’s say but um the
writing’s on the wall um Bitcoin is
going to be held by um everybody
everywhere all pools of capital
sovereigns all over the world uh Pension
funds all over the world um everybody
will need to own Bitcoin it is
inevitable it’s coming and we have many
orders of magnitude to go all right
gentlemen appreciate the insight as
always thanks for joining us on trade
talks I’m Jill mandrino Global markets
reporter at n thank you

Steven Lubka, Head of Private Clients, Swan Bitcoin Matt Ballensweig, Managing Director, at BitGo, and Austin Alexander, Co-Founder of LayerTwo Labs, join Jill Malandrino on Nasdaq TradeTalks to discuss the short- and long-term impacts of the #bitcoin halving and why it is a critical part of bitcoin’s programmatic monetary system.

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