Bitcoin Halving as 'A Crypto Super Cycle Marketing Event' & Its Three Narratives
Crypto researcher Messari delved into Bitcoin (BTC)'s upcoming third halving, and among investment theses and possible implications, provided the teams' opinions on major and impactful halving (which also deemed to be 'a marketing event at best') narratives.
CEO Ryan Selkis believes that the market is underestimating the amount of impact that'll be created by the hardening of the digital gold narrative, the entry of new "mega-whale" investors, and the momentum trade will have in 2020. For a deeper look ahead of this BTC halving, Selkis explored three narratives built on that event.
1. The hardening of the gold narrative
Selkis finds the best investment narrative to be a gold-digital gold mix as part of an inflation-resistant basket, where BTC would be "the primary beneficiary of the generational rotation of investment assets from boomers to millennials." This third halving, he argues, "officially drops" the monetary expansion rate of the world’s number one crypto below the US Federal Reserve System's 2% inflation target for the first time in history.
"Perhaps I’m overblowing this," Selkis writes, "but I believe the narrative reinforcement that "bitcoin is now less inflationary than the Fed" is a turning point that marks bitcoin’s evolution from beta to production as bona fide digital gold." And this is a perfect time for this narrative, he argues, as institutional investors are testing the waters.
2. The introduction of large new tribes
Speaking of institutional investors - "[t]his new tribe is orders of magnitude larger and more influential than the existing and previous investor sets," argues Selkis, and it has expanded around the previous halvings too. With exchanges gaining prominence and mining becoming "professionalized," crypto audience expanded from the techno-libertarian to the retail libertarian crowd in 2012, then to the general retail crowd in 2016, assisted by the initial coin offering (ICO) bubble.
The industry got a major push with the capital from the last boom, using it to build the infrastructure “needed for the next super cycle. And now this infrastructure is just sitting there waiting for these new customers who could infuse 100x more liquidity into the system than exists today.”
3. Asset momentum (aka the virtuous cycle)
Selkis acknowledges the power of marketing around price hikes and supply shortages. Giving an example of large scale conferences he ran, like Consensus, he says that there’s this law called the "doubling date," according to which, if you double the ticket revenue six weeks before the event, you can forecast the final numbers. “In crypto, I can tell you the doubling date is closer to a panic-inducing 3.5 weeks in advance,” the CEO writes. The doubling date can be extended further in via marketing artificial scarcity and coming price hikes. “I view the halving similarly: as a crypto super cycle marketing event which will pick up steam as the price ticks north,” he says.
Similarly, research analyst Ryan Watkins says that halving is a marketing event at best, where "Bitcoin reminds the world of its superior properties as a monetary good," but that it’s made special this time around as BTC is now "part of mainstream consciousness," while "the current macro environment is prime" for the coin.
Research analyst Jack Purdy also disagrees with halving bulls' predictions made via the stock-to-flow (S2F) model, that the price will skyrocket due to the halving. The supply of BTC can't decrease as Bitcoin is a terminally fixed supply asset, says Purdy, so the only factor that could increase the price "of a good with perfectly inelastic supply is an increase in demand." (Learn more: Hedge Fund Chief ‘Concerned’ by Growing Bitcoin Stock-to-Flow Hype) Furthermore, Messari's co-founder Dan McArdle believes that it's the increase in awareness, education, and adoption over many years or decades that will bring forth BTC's price growth as a long-term phenomenon.
All this said, the halving itself is not that interesting, argues Messari's Head of Product, Qiao Wang. "The fact that the halving occurs in a predictable and verifiable way is the real innovation." And while Wilson Withiam sees this halving as a reminder of the work still left to be done to ensure BTC's longevity, Eric Turner adds that halving proves that BTC works, and its ability "to follow through on defined monetary policy without centralized coordination is what makes it interesting and in today’s world an important novelty."
The Bitcoin mining reward halving is expected to occur on May 11-12. Currently, (10:13 UTC), BTC trades at USD 9,323 and is up by 3.4% in a day and by 6% in a week.
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