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Bitcoin HALVING and Spot ETF

Tatiana Revoredo

MIT Professor | Innovation Advisor | LinkedIn Top Voice | Oxford Blockchain fdn | #2Top50 Cointelegraph Br | Ex Harvard University Cibersecurity

Bitcoin HALVING and Spot ETF 


  • Halving: what is Bitcoin Halving? Why does halving exist? The relationship between Bitcoin Halving and the US presidential elections.
  • What impact will the next halving have on bitcoin mining? What will happen when the last bitcoin is mined? How does Bitcoin’s scheduled supply shock impact its price? Is the next halving already priced in?
  • Spot Bitcoin ETF. Is it better to buy bitcoins directly from a broker, or invest in a Bitcoin ETF? Spot vs. Futures. Pros and Cons of Spot Bitcoin ETFs. What to expect if a Spot Bitcoin ETF is approved?   

⎯ Halving

1. What is Bitcoin Halving? 

The Bitcoin blockchain adds a new block to the network approximately once every 10 minutes. This means that an average of 144 Bitcoin transaction blocks are added to the blockchain every day. 

As miners are currently rewarded with 6.25 BTC per block, around 900 BTC coins are minted or issued per day.

Halving is an event programmed into the blockchain to reduce the supply of bitcoin [Fig.1]. 

Thus, both the reward to miners per block mined and the issuance of bitcoin decrease with each Halving.

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Fig 1 – Source: Glassnode, 2023

2. Why does Halving exist? 

The unlimited issuance of money by central banks causes inflation

The greater the amount of money in an economy – known as the money supply – the more expensive products and services become, and the lower the population’s purchasing power.

Satoshi Nakamoto created Halving in the Bitcoin protocol with the aim of combating inflation. 

By reducing the rate at which new bitcoins are issued, Halving contributes to the scarcity and deflationary nature of Bitcoin. To understand this better, check out the relationship between the Bitcoin supply and the inflation rate [Fig.2].

A graph showing the price of bitcoin

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Fig. 2 – Source: River Financial

Halving is therefore a mechanism that makes bitcoin mining increasingly difficult. And as halving takes place, the rate at which bitcoins are issued decreases until it reaches the limit of 21 million bitcoins.

3. The relationship between Halving and the US presidential elections

Basically, the halving happens every 210,000 blocks. That is, approximately every 4 years the reward for mining a block on the Bitcoin blockchain is halved. 

Here, it’s worth noting that the halving coincides with the US presidential election cycle. That means that bitcoin’s scheduled supply shock was scheduled to happen in the same year as the transfer of power of the US Presidency.

This is curious, to say the least, because the process of issuing new bitcoins is different from issuing a fiat currency. 

When Satoshi Nakamoto wrote the Bitcoin protocol software code and published it on the internet, he proposed the following: 

If you provide security to this financial network and help it to operate, you will be rewarded for it. The logic of the pre-established rules in the Bitcoin protocol was very transparent and was written in programming language.

While traditional money is created by Central banks that define its issuance according to the monetary policy of a given government, bitcoin issuance is fixed, pre-established in the Bitcoin blockchain protocol and limited to 21 million units.

In this context, almost 89% of the total 21 million bitcoins are already in circulation. This means that 19 million bitcoins have already been created (issued), with only 2 million left to be mined.

4. What impact will the next Halving have on bitcoin mining? What will happen when the last bitcoin is mined?

The next Halving is scheduled to take place on April 24, 2024, when the reward per mined block – which happens every 10 minutes – will be reduced from 6.25 bitcoins to 3.125 bitcoins.

There have been three Halvings so far:

  • November 28, 2012, for 25 bitcoins
  • July 9, 2016, to 12.5 bitcoins
  • May 11, 2020, for 6.25 bitcoins

Note that before the first Halving on November 28, 2012, the reward was 50 bitcoins per block [Fig.3]. 

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Fig. 3 – Source: Easy Equities

The last bitcoin will be mined around the year 2140. 

 So, in approximately 117 years’ time, there will be no more bitcoin mining and miners will have to earn their bitcoin through transaction fees. 

Will transaction fees be enough to incentivize miners to keep the network secure?

Recently, events in the Ordinals space have shown that fee revenues can outweigh block rewards [Fig.4]. 

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Fig 4 – Source: Dune Analytics, Data Always, Platfair Edu

5. How does Bitcoin’s planned supply shock affect its price? 

Historically, Bitcoin has witnessed rising prices before and after each halving, as we’ll see in the following.

After Bitcoin’s first halving in November 2012, its price rose from around $11 to $1,100 within a year.

 However, the price then fell and stayed below $1,000 for several years.

In the second Halving, in just 18 months bitcoin went from $600 to $20,000.

However, it fell significantly in 2019.

In the third “Halving”, in May 2020 the bitcoin price was around $8,000. Going up to $63,000 in April 2021. However, after reaching $69,000 ATH [All Time High], it fell again in December 2021.

What can we learn from the history of the Halvings?

In previous Halvings [Fig.5], the price of Bitcoin usually rises, reaching a level and then falling slightly. After that, it shows a significant increase 9 to 15 months later.

A screenshot of a computer screen

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Fig.5 – Source: MDPI and ACS Style. A MSGARCH Approach. Mathematics 2023, 11, 698.

This is because with a decreasing supply of bitcoins and stable or growing demand, prices tend to rise.

Unlike traditional assets, where supply can increase based on demand, bitcoin’s supply remains fixed.

This known and fixed supply of 21 million bitcoin units makes it easier to project Bitcoin’s future performance.  

6. Has the next Halving already been priced?

The Halving price may not be priced in. As we saw in the previous topic, the significant increase in the price of bitcoin occurs 9 to 15 months after the halving. 

This is why in August, the co-founder of the Bitcoin investment company Onramp, Jesse Myers, declared that the market will only “price” the halving after it has occurred.

7. Halving’s effects go beyond bitcoin’s price

Bitcoin’s monetary policy is transparent, predictable and immutable.

And Bitcoin Halving proves the genius of its design by reinforcing scarcity, decentralization and transparency – principles that set bitcoin apart from traditional currencies.

The effects of Halving go beyond the price of bitcoin, because they ensure that bitcoin remains a valuable and scarce resource.

⎯ Spot Bitcoin ETF

8. Is it better to buy bitcoin directly from a broker or invest through a Bitcoin ETF?

An ETF – “Exchange Traded Fund” –  is an investment vehicle that monitors the performance of a particular asset or group of assets.

ETFs allow investors to diversify their investments without actually owning the assets tracked by a fund.

In the specific case of Bitcoin ETFs (called Spot Bitcoin ETF or physical ETF), they are an Exchange-Traded Fund that allows investors to gain exposure to bitcoin through traditional stock markets, without the need to directly buy or sell the digital asset on a crypto exchange.

A Bitcoin ETF basically reflects the price of the cryptocurrency, and they can be settled in cash or physically, which means that investors will receive fiat currency or bitcoin, respectively.

Thus, there are some advantages to acquiring bitcoins via ETFs:

  • There is no need to go through the process of learning how to safely store Bitcoin. Many investors still don’t understand the crypto market, don’t have the time to learn, or feel more comfortable hiring a third party to invest for them.
  • Buying an ETF through an online broker can be significantly safer, faster and less subject to interruptions than buying digital assets directly from a crypto exchange (although there are excellent brokers to work with).
  • Stock exchanges, depending on the country, are more liquid than crypto exchanges, which facilitates the trading of ETFs.

However, as everything has two sides, a Bitcoin ETF also has disadvantages:

  • ETFs can only be bought and sold during market trading hours, while crypto markets operate 24 hours a day, seven days a week. This means that if the price of Bitcoin moves sharply, you may have to wait for hours, or for an entire weekend, before you have the chance to buy or sell more.
  • It’s free to hold your own bitcoin, while ETFs charge management fees.
  • ETFs require you to trust third-party custodians, which is contrary to one of the basic principles of the crypto world: self-custody.

It all depends on whether you prefer the convenience of having someone else manage your money, or whether you like to take charge of your financial life and have full control of your assets.

Spot Bitcoin ETFs have been a hot topic in the crypto space since 2013, when the Winklevoss twins’ COIN was filed with the Securities and Exchange Commission (SEC).

Although numerous proposals for Bitcoin ETFs have been filed, withdrawn, shelved and rejected since then, expectations for a Spot ETF returned to the scene with BlackRock’s Spot Bitcoin ETF application and, especially after Grayscale won the lawsuit against the SEC regarding the conversion of its Futures ETF into a Spot ETF. 

Although Grayscale’s legal victory does not exactly represent the approval of the Spot ETF itself, it is important because the SEC is no longer able to deny Spot ETFs for any of the reasons it has denied them so far.

9. Spot ETF vs Futures ETF. Pros and Cons of Spot Bitcoin ETFs

In October 2021, the SEC allowed the listing and start of trading of two funds that provide exposure to Bitcoin futures traded on the CME

In other words, the American regulator approved a Bitcoin Futures ETF, which is quite different from a Spot Bitcoin ETF.

Although this was a step forward for millions of investors who demand access to new ways of investing in bitcoin, the Futures ETF is potentially much more volatile than a Spot ETF and can impose substantially higher fees on investors due to the premium at which Bitcoin futures normally trade, in addition to the monthly cost of futures contracts.

Now, if Spots Bitcoin ETFs are based directly on the asset, wouldn’t they provide greater protection for investors? Apparently, yes.

Spot bitcoin ETFs and derivatives-based bitcoin ETFs differ in the way they are structured and the degree of exposure they offer to bitcoin price variations.

Spot bitcoin ETFs hold bitcoins directly, while derivatives-based bitcoin ETFs use financial instruments such as futures contracts to replicate bitcoin prices.

As Spots bitcoin ETFs hold direct ownership of bitcoins, this exposure is more intuitive for investors, making Spots bitcoin ETFs simpler for those investing in bitcoin. 

Consequently, Spots bitcoin ETFs can be more transparent, as each ETF security corresponds to a specific number of bitcoins held.

In contrast, derivatives-based ETFs are opaquer to investors, as their value is derived indirectly from futures contracts, which can be influenced by various market factors in addition to the spot price of bitcoin. Here’s a summary of the differences between the types of Bitcoin ETF [Fig.6].

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Fig.6 – Source:

Well, the advantages of Bitcoin Spots ETFs for investors are:

  • Convenience: spot bitcoin ETFs eliminate technical obstacles, simplify asset management and are a more attractive proposition for those accustomed to traditional investments. Spot bitcoin ETFs increase accessibility to a greater number of investors because they substantially reduce the barriers to entry into the crypto market.
  • Regulatory oversight: When you buy your own bitcoins, you may be doing so without the backing of clear, standardized regulations. Spot bitcoin ETFs are subject to rules that are supposed to protect investors.
  • Tax implications: Spot bitcoin ETFs can have tax benefits compared to holding cryptocurrencies directly. As the tax regime for ETFs has been established for a long time, investors can know in advance what their tax obligations will be.

As for the disadvantages of Bitcoin Spots ETFs, we can mention the following:

  • Management fees: Although investing in Spot bitcoin ETFs allows you to save the time and costs of exchanging and eliminate the risks of securing bitcoins on your own, these ETFs charge management fees or expense ratios to cover operating costs, diminishing your returns over time. Note that these fees can be higher than those of traditional Equity ETFs because the ETF also needs to pay fees for exchanging and securing bitcoins.
  • Tracking error: Although Spot bitcoin ETFs seek to mirror the performance of bitcoin, tracking error differences can occur between the cost of the ETF share and the value of bitcoin. Reasons for this can include liquidity in the market, delayed rebalancing of fund holdings and management fees.
  • Tracking error: Although Spot bitcoin ETFs seek to mirror the performance of bitcoin, tracking error differences can occur between the cost of the ETF share and the value of bitcoin. Reasons for this can include liquidity in the market, delayed rebalancing of fund holdings and management fees.

10. What to expect if a Spot bitcoin ETF is approved? 

On October 16, a fake tweet about the approval of a Spot Bitcoin ETF provoked a 10-minute rally in the price of bitcoin, showing us what’s to really come. In just one hour, there were more than $100 million in liquidations.

The market is anxious for the Bitcoin Spot ETF to be approved and this anxiety can be seen in the words of Larry Fink, CEO of BlackRock, in a recent interview for US TV.

The curious thing here is that Fink had already criticized cryptocurrencies, saying in 2017 that the popularity of digital currencies was largely due to money laundering.

What changed his mind?

Growing interest from clients and the high cost of transactions motivated BlackRock to take a closer look and it decided to dive into the crypto space. 

In June of this year, BlackRock – which manages $9.5 trillion in assets – applied to the SEC for a bitcoin cash fund traded via ETF.

This request led institutional investors to pour money into the crypto market – which in turn caused the asset to reach its highest value in 12 months.

With regard to ETFs, Fink said in July this year that: 

“Over the last five years, more and more global investors are asking us about the role of cryptocurrencies and, as I said, I think many cryptocurrencies are international assets.”

Now, in a recent interview with CNBC TV, Fink said that Bitcoin can play a diversification role in investors’ portfolios. He added:

“It has a differentiated value compared to other asset classes, but the most important thing is that, because it is so international, it will transcend any currency”.

January 10, 2024 remains a crucial date because it represents the deadline for the SEC to respond to ARK 21 Shares’ request for registration of the Spot Bitcoin ETF

Here, the first possibility is that all active registrations will be approved if ARK’s request is approved by January 10, and that the approval will lead to a sharp rise in bitcoin price. This possibility is very likely to happen.

A second chance on January 10 is a rejection. It is very unlikely that all active registrations will be denied by their deadlines if ARK’s application is denied. If this hypothesis materializes, there will be a strong sell-off in bitcoin.

The approval of a Spot bitcoin ETF could increase the liquidity of the bitcoin market, offering more buyers and sellers. More liquidity could lead to more stable prices and less volatility, making bitcoin more attractive to ordinary investors.

Currently, there has been a moderate impact on the crypto market from macroeconomic data, the strength of the dollar and FED speeches. 

In this context, it is the events related to Halving and the possible approval of a Spot Bitcoin ETF that represent the most significant source of news driving the crypto market and the price of bitcoin.

It is therefore worth keeping an eye on upcoming events.

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