Goldman Sachs, the financial banking giant, is cautioning investors in Bitcoin (BTC) that they may not see the expected returns from the highly anticipated Bitcoin halving. While the Bitcoin community is hopeful that history will repeat itself, with previous halvings leading to remarkable rallies and new all-time highs, Goldman Sachs warns that other macro factors, not just the halving, have driven bullish trends in the past.
Data shows that previous halvings have resulted in returns of 93x, 30x, and 8x in the last three cycles. However, there is concern that the upcoming cycle may offer less than 8x in returns as the return has been decreasing over time. Experts attribute this decrease to the increase in prices and price stability, which have made returns more moderate. Additionally, the adoption and demand for Bitcoin have recently peaked, largely due to Bitcoin spot ETFs.
In a note to clients, Goldman Sachs’ Fixed Income, Currencies, and Commodities (FICC) and Equities team warns against extrapolating past cycles and the impact of the halving, given the prevailing macro conditions. They caution that the upcoming event could be a “buy the rumor, sell the news event,” but also acknowledge that BTC price performance will continue to be driven by the supply-demand dynamic and demand for BTC ETFs.
One significant macroeconomic factor influencing Bitcoin is the high inflation and high-interest rate climate. In the past, US investors have had a high risk appetite, but the current conditions are different. US interest rates, the highest globally, are expected to remain high in 2024 due to stubborn inflation and a strong economy, eliminating hopes for interest rate cuts.
Considering these trends, the inflows into recently launched ETFs could have a significant impact on Bitcoin’s price trajectory after the halving. Prices have correlated with inflows since the launch, reaching an all-time high of nearly $74,000. Bloomberg data shows that 11 of the spot ETFs launched have accumulated $59.2 billion in assets under management, indicating unprecedented demand. If inflows continue to be high, it is highly likely that prices will continue to rise.
Currently, BTC is trading at $62,700 after a 2% rebound from a temporary dip below $60,000. An analyst from CryptoQuant believes that the price slump may be coming to an end, as traders have sold off most of their profitable holdings, reducing downward pressure on Bitcoin’s price. With an anticipated supply shock after the halving, bullish investors expect BTC to stage a massive rebound and reach $80,000.
