A new report by America’s largest cryptocurrency exchange Coinbase revealed that the effect of Bitcoin halving events on the asset’s performance is still unclear as several exogenous factors play significant roles in the market’s behavior.

While the halving is viewed positively because it is believed to enhance BTC’s prospective scarcity and support its supply-demand dynamics, getting a clear picture of the market’s reaction would require disentangling the effects of U.S. dollar movements, interest rates, and global liquidity.

Unclear Effect of BTC Halving

Bitcoin’s halving happens every four years or every 210,000 blocks. During the event, the block rewards for BTC mining are reduced by 50%. The first halving happened in 2012, and the next, the fourth, is expected to occur between April and May 2024. The upcoming one will reduce BTC’s block rewards from 6.25 BTC to 3.125 BTC per block.

David Duong, Head of Institutional Research at Coinbase, explained in the report that with only three halving events, evidence of the market’s reaction is still limited, as they all took place alongside some significant monetary and fiscal developments.

In 2012, the Federal Reserve Board began to buy mortgage-backed securities and long-dated Treasuries for the third round of quantitative easing (QE3). During the second halving in 2016, Brexit stirred fiscal concerns in the E.U. and U.K., leading to increased BTC purchases. When the third halving occurred in 2020, central banks and governments responded to the COVID-19 pandemic “with unprecedented levels of stimulus,” which drove global liquidity higher.

“Detrending bitcoin price action from the movements in such factors helps elucidate the situation somewhat. However, outside of the third halving, evidence that these halving events supported bitcoin price action is not entirely clear cut,” Duong said.

Getting a Clear Picture

Duong further emphasized that