According to James Check, lead on-chain analyst at Glassnode, the recent surge in Bitcoin’s price may not be sustainable in the long term. Despite reaching a new yearly high of $44,400, an increase of 16.5% in just seven days, Check believes that a consolidation or correction is likely in the near term.
“A few months rest would allow investor cost bases to re-acclimate above the True Market Mean Price,” wrote Check in a post on Tuesday.
The True Market Mean Price, a metric developed by Glassnode, measures the average price at which BTC investors have acquired their coins based on blockchain data. Currently standing at $31,454, approximately 25% below the current exchange rate, this metric is considered a reference point for mean reversion models.
The recent surge in Bitcoin’s price began in October, coinciding with the conflict between Israel and Palestine and BlackRock CEO Larry Fink referring to Bitcoin as a “flight to quality.” Ongoing negotiations between BlackRock and U.S. regulators regarding their Bitcoin spot ETF application have further boosted investor confidence in the cryptocurrency.
Unlike previous years, Bitcoin has not experienced any corrections of more than 20% since the beginning of 2023. Check believes that Bitcoin may continue to consolidate between $35,000 and $50,000 until the halving event.
The Bitcoin Halving and its Impact
Check explains that for every Bitcoin currently mined, approximately 2.5 coins are being removed from circulation and stored in “hodler wallets.” With the upcoming Bitcoin halving, where the number of daily BTC mined will be reduced by 50%, this ratio is expected to double. Analysts consider the halving as a catalyst for higher Bitcoin prices.
The halving is also a significant event for the BTC mining industry. Miners will see a 50% decrease in their revenue, forcing less efficient miners to leave the market while stronger miners continue to profit from the appreciation of Bitcoin in the future.
Check estimates that the cost of BTC production for miners will range between $45,000 and $52,000 per coin after the halving.
