7 Main Post-Halving Bitcoin Narratives
Decentralized digital gold campaign More institutional investors, more derivatives Bitcoin scaling up, green mining Regulation and CBDCs
What happens next? What will become the next talk of the town as the “priced in/not priced in” debate has now disappeared together with 50% of the block subsidy on May 11?
According to industry figures interviewed by Cryptonews.com, a number of key narratives and trends are likely to dominate Bitcoin’s fate over the coming 12 months.
From bitcoin’s increasing attractiveness as a store of value in times of economic crisis to growing regulation, all of these narratives could ultimately make BTC more mainstream and more accessible to a wider pool of investors.
1: Decentralized digital gold campaign
Jay Hao, CEO of major crypto exchange OKEx, tells Cryptonews.com that the ongoing coronavirus crisis may place sell-off pressure on bitcoin in the short-term. That said, he expects the narrative of Bitcoin as ‘digital gold’ to grow in stature beyond the immediate aftermath of the halving.
“However, the macro context looks bullish for Bitcoin in the mid-to longer term,” he says.
“As people begin to question the value of 'helicopter money' and the effect that unchecked inflation of money supply has, BTC has just done the exact opposite … I think a big trend we will see this year is Bitcoin further strengthening its status as digital gold.”
Binance Research agrees with this analysis.
“Now, every time a major central bank will print money … the original Bitcoin ethos is likely to gain new traction,” a spokesperson tells Cryptonews.com. “The original Bitcoin narrative is likely to reemerge or be reinforced: Bitcoin as a store of value, as digital gold.”
2 & 3: More institutional investors, more derivatives
As a result of Bitcoin’s growing deflationary stature, analysts are expecting another key post-Bitcoin halving narrative to emerge: an increase in institutional investors.
“We will also see more institutional investors coming on board now that they see BTC as a hedge,” says Jay Hao. “We're already seeing some very bullish signs for the market like famous macro investor Paul Tudor Jones adding BTC to his public fund portfolio as a hedge.”
In his view, this “will certainly open up the gates for more exchanges and more big banks globally.”
On top of this, Hao expects to see the “BTC derivatives market continue to grow and become exponentially bigger, perhaps even three or four times bigger than the spot in the next 12 months.” (Learn more: Crypto Derivatives Market Might be 'Double the Size' of Spot Market in 2020)
However, not everyone thinks that the current economic conditions are ripe for a steady growth in institutional investment. Also speaking to Cryptonews.com, ThinkMarkets analyst Fawad Razaqzada believes there’s a risk BTC may correct itself in the coming months.
“Unemployment has skyrocketed across the globe and companies are filing for bankruptcies left right and centre,” he says.
“And while central banks and governments are doing all they can to address the supply side of the economy, demand from households and businesses could nonetheless remain soft for a long time which could undermine economic recovery.”
Against this fundamental backdrop, Razaqzada suspects that bitcoin investors may take advantage of higher prices to book profit, while others may be deterred by the volatile economic circumstances. As such, the narrative could be one of frustrated potential.
4 & 5: Bitcoin scaling up, green mining
Another less prominent – and longer-term – narrative will relate to Bitcoin scaling. As Ethereum (ETH) eventually transitions to the proof-of-stake (PoS) Ethereum 2.0, analysts are expecting such developments to put extra pressure on Bitcoin to develop its own scaling solutions, as well as more ecological mining methods.
Jay Hao says, “Bitcoin has scalability issues, but there are many protocols being worked on such as the Lightning Network and Liquid sidechain. I think the challenges for Bitcoin and other [proof-of-work] coins are to find more energy-efficient ways of mining with more sophisticated equipment, green energy, and cloud solutions moving forward.”
Likewise, Binance Research’s spokesperson doesn’t expect Bitcoin to be swayed too much by Ethereum’s shift to PoS.
However, this might change in the long term, “as Bitcoin is indeed facing foreseeable and inherent problems.”
Basically, Binance Research foresees that one longer-term narrative for Bitcoin will relate to how it solves the problem of diminishing block rewards. While some analysts believe that Bitcoin will have to fundamentally reform itself to overcome this challenge, Binance Research believes that “non-custodial off-chain solutions, such as the Lightning Network, could avoid the necessity to choose between … compromises.”
6 & 7: Regulation and CBDCs
Lastly, tightening regulation is likely to be another Bitcoin narrative in the coming months and years, particularly as Facebook’s Libra forces regulators to sit up and take notice of cryptocurrencies.
“The organization behind the FATF, the Financial Stability Board, urged countries to adopt and enforce local variants of the FATF’s recommendation before Libra was to launch,” explains Binance Research’s spokesperson. “So yes, the arrival of Libra very likely fast-tracked regulations that are not only applicable to stablecoins but to crypto-assets more generally.”
More generally, Jay Hao expects that Libra and central bank digital currencies (CBDCs) will, in the end, divert more attention towards Bitcoin and other cryptocurrencies.
“Once they begin to learn about cryptocurrencies by using a central bank-backed version of them or a corporate coin, they will have the knowledge and many will develop a natural interest in Bitcoin, less of a medium of exchange and more of a store of value.”