Bitcoin goes through a process called halving every four years. The inbuilt mechanism reduces the reward per block mined on bitcoin’s blockchain by 50 percent. Essentially, reward halving cuts the pace of supply expansion by 50 percent every four years.
Searches for “bitcoin halving” on Google Trends recently reached record highs, suggesting peak interest in the retail crowd about the upcoming supply altering event.
Queries about the highly anticipated event peaked in the week ending April 11, the highest in bitcoin’s (BTC) 11-year history. It moved down 18 percent as of press time but remains at elevated levels. It remains double what it was for the week ending March 21.
Google Trends scale their searches on a range of 0 to 100 “based on a topic’s to all searches on a topic”, according to the company.
The sharp rise is indicative of an “increase in retail interest”, according to Mike Alfred, CEO of fintech and data company Digital Assets Data.
The cryptocurrency is set to undergo its third-ever reward halving next month, following which the per block reward would drop to 6.25 BTC from the current 12.5 BTC.
The popular narrative is that halving is a price-bullish event. Bitcoin’s price has witnessed a solid rally over the past few weeks. The top cryptocurrency is currently changing hands near $7,050, representing over 80 percent gains on the low of $3,867 registered on March 13.
As such, one may associate the recent price rally with the uptick in the search interest for bitcoin halving. However, it is doubtful anybody would be able to establish just how much of that rise in interest has translated into actual purchases of bitcoins.
It’s quite possible that the retail community is merely searching for information about halving and its impact on price, but is sitting on the fence. Even the analyst community is divided on the prospects of a post-halving price rally.
Some observers expect the 50 percent reward cut to bode well for bitcoin’s price. “Halving should create increased upward pressure on the price of bitcoin in the coming two months”, Matthew Dibb, co-founder and COO of Stack, told CoinDesk at the beginning of April. Further, stock-to-flow models predict that halving will send bitcoin’s price to $100,000.
However, crypto asset analytics company Coin Metrics, in its recent “State of the Network” report concluded that miner-led selling pressure around bitcoin is likely to increase in the coming months.
Queries for the phrase “buy bitcoin” have not seen a similar spike.
The search term “buy bitcoin” is nearly a third down from when bitcoin suffered its “Black Thursday” crash on March 12.
Thus increasing retail interest in the upcoming halving may not translate into additional buying pressure around the cryptocurrency.
Yet, some observers cite the recent rise in the number of bitcoin addresses holding at least 1 BTC and at least 0.1 BTC as evidence of accumulation by retail investors ahead of halving.
The number of unique addresses holding at least one bitcoin rose to a record high of 805,805 on April 16 after dropping from 795,140 to 789,399 in the seven days to March 16, according to data provided by Blockchain intelligence firm Glassnode. During that time period, bitcoin’s price fell from $9,000 to $4,000.
The number of unique addresses holding at least 0.1 BTC also rose to a record high of 2,984,777. The number began rising sharply in February and maintained its ascent even during the March price crash.
“We are hearing and seeing increased retail interest. The unprecedented era of stimulus and money printing has pushed many people toward bitcoin as an alternative monetary system”, said Mike Alfred, CEO of Digital Assets Data.
The Federal Reserve cut interest rates to zero and launched an open-ended asset purchase program to counter the coronavirus-led economic slowdown. The balance sheets of G4 central banks – the Fed, Bank of Japan, European Central Banks and the Bank of England — have expanded to 40 percent of their respective nation’s combined gross domestic product, as noted by popular analyst Jeroen Blokland.
While the rise in the number of unique addresses does suggest accumulation, it should be noted that a single user can hold 50,000 coins in 50,000 different addresses. Therefore, these metrics do not necessarily represent retail accumulations.