Goldman Sachs, the financial banking giant, is cautioning Bitcoin investors about the upcoming Bitcoin halving and its potential to underwhelm in terms of returns. While the Bitcoin community is hopeful that history will repeat itself and the halving will lead to remarkable rallies and new all-time highs, Goldman Sachs points out that previous bullish trends were driven by not only the halving but also other macro factors.
Historically, 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. This decrease in returns can be attributed to price stability and the increase in prices. Nonetheless, the adoption and demand for Bitcoin have reached their peak in recent months, primarily due to Bitcoin spot ETFs.
In a note to clients, Goldman Sachs’ Fixed Income, Currencies and Commodities team warns against extrapolating the past cycles and the impact of the halving, given the prevailing macro conditions. They also caution that the upcoming event could be a “buy the rumor, sell the news event.” However, they believe that BTC price performance will continue to be driven by the supply-demand dynamic and the demand for BTC ETFs, which are the primary determinants of spot price action in the crypto markets.
One significant macroeconomic factor to consider is the high inflation and high-interest rate climate. Unlike in the past, U.S. investors’ risk appetite is currently low, and interest rates in the country are likely to remain high until 2024. This is due to stubborn inflation and a strong economy, which diminishes hopes for interest rate cuts.
Considering these trends, the inflows into recently launched ETFs could play a crucial role in Bitcoin’s price trajectory after the halving. Prices have correlated with inflows since the launch, leading to an all-time high of nearly $74,000. Bloomberg data reveals that 11 spot ETFs have amassed $59.2 billion in assets under management, indicating unprecedented demand. If the inflows continue to be high, it is highly likely that prices will continue to rise.
Currently, BTC is trading at $62,700 after experiencing a 2% rebound following a temporary dip below $60,000. Analyst Julio Moreno from CryptoQuant suggests that Bitcoin’s price slump may be coming to an end, as traders have sold off most of their profitable holdings, potentially reducing downward pressure on the price. With an anticipated supply shock after the halving, bulls expect BTC to stage a massive rebound and reach $80,000.