The Bitcoin Halving Effect
Bitcoin's May 2020 halving event sparked significant excitement, but its impact isn't immediate. The halving effect unfolds gradually as reduced block rewards meet steady (or growing) demand, constricting supply over time. Historical data suggests the full effect emerges 6–12 months post-halving, reinforcing Bitcoin’s scarcity narrative.
Key Observations:
- Supply Squeeze: Post-halving, daily Bitcoin production dropped from 1,800 BTC to 900 BTC.
- Strongholder Accumulation: 60% of Bitcoin hasn’t moved in over a year, signaling long-term holding.
- Wrapped BTC (WBTC): Ethereum-hosted BTC now exceeds $2B, with ~150,000 BTC locked in DeFi protocols.
Ethereum 2.0’s Staking Revolution
ETH2.0 introduces the largest supply shock in Ethereum’s history, surpassing previous ICO and DeFi-driven demand.
1. Staking Demand
- Current Staking: ~8% of ETH is staked in DeFi; Grayscale holds another 2%.
- Projected ETH2.0 Staking: 30%+ of circulating supply, drastically reducing liquidity.
2. EIP-1559 and Value Capture
- Fee Burn Mechanism: Base fees from transactions are permanently destroyed.
- Fee Revenue: Ethereum’s annualized fees hit $760M (double Bitcoin’s), positioning ETH as a deflationary asset.
- Deflation Potential: Sustained high usage could make ETH a store of value rivaling BTC.
3. Settlement Dominance
- Ethereum processes over $1T annually, surpassing Bitcoin as crypto’s top settlement layer.
DeFi’s Enduring Growth
While 2020’s "yield farming" frenzy cooled, DeFi’s fundamentals remain strong across:
- Lending (Aave, Compound)
- DEXs (Uniswap, Sushiswap)
- Derivatives & Insurance (Synthetix, Nexus Mutual)
Outlook: As BTC/ETH valuations rise, DeFi’s real-world utility may attract capital from overvalued assets.
FAQs
Q: How does Bitcoin halving affect price?
A: Halvings reduce new supply, creating upward pressure as demand outpaces mining rewards. Historically, prices peak 12–18 months post-halving.
Q: Will ETH2.0 make Ethereum deflationary?
A: Yes, if EIP-1559’s fee burn outpaces new ETH issuance. Current projections suggest moderate deflation under high network usage.
Q: Is DeFi still profitable after yield farming?
A: Yes—blue-chip protocols (e.g., Uniswap, Aave) generate substantial fees from real usage, not just token incentives.
👉 Discover how ETH2.0 staking rewards compare to traditional investments
👉 Explore Bitcoin’s historical halving cycles