The Wolf Den #518 - What Is A Triple Halving?

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Have you ever heard of a “triple halving” before?

It’s not a term from the world of sports, but is the crypto equivalent of Hank Aaron breaking Babe Ruth’s home run record and then running the 100-meter dash in under 9 seconds.

The Ethereum merge and subsequent triple halving are as epic as it gets.

The idea behind Ethereum’s triple halving comes from the concept of Bitcoin’s halving schedule that takes place roughly every 4 years. After 210,000 blocks are mined on the Bitcoin blockchain, the rewards issued to miners are cut in half. The halving is important because, assuming steady growth in the buying pressure over time, a reduction in supply somewhat guarantees that price will rise. Even if demand drops but less than supply, price goes up.

Bitcoin’s supply and demand balance, reliability, and scarcity are a magical combination. Ethereum is about to be put under a similar spell.

Ethereum was created in 2015 and has never had a halving. In transitioning from to proof-of-work to proof-of-stake , something profound will happen to Ethereum’s daily issuance. Historically, Ethereum’s supply has inflated between 2% to 5% a year as a reward issuance to miners. Calculating daily issuance is tricky, because the number changes every day. It is just important to note that Ethereum is inflationary and that these coins are largely sold by miners on the open market. It’s a form of persistent selling pressure.

After the merge, everything changes.

After the triple halving , this number is cut down dramatically. In percentage terms, the supply is expected to inflate by less than half a percent every year.

Your next logical question could be this - are fee burns that significant? Yesterday almost 6.5k Ethereum were burned, which equates to roughly $11.7M. This means that demand for Ethereum will outsize supply by a large factor.

Ethereum becomes deflationary.

Ethereum’s triple halving reduces daily sell pressure and issuance to an amount that could below Bitcoin's… but there’s a catch.

If you take a look at CoinMarketCap, you will see that Ethereum’s daily trading volume is well into the billions. Yesterday’s was about $22B. So why is the triple halving a big deal if it amounts to so little of the circulating supply? That’s a fair question and here’s my answer. 

Most experts will tell you that the vast majority of volume on cryptocurrencies is major funds exchanging their assets back and forth. It’s not real volume driven by investors like you and me. It’s quants looking to outcompete each other over small margins by market making and arbitrage.

The triple halving will matter because it will make a large dent in the volume that represents real Ethereum usage. Furthermore, it solidifies Ethereum as a deflationary asset and reduces energy usage by 99%. 

It’s important to remember that Ethereum burned could be seen as demand. Burned Ethereum needs to be replenished by buying on the open market.

We will not know for certain how much of an impact the triple halving will have until it comes, but if a halving has worked well for Bitcoin, I suspect a tripled version to be massively bullish for Ethereum.

In this report, we bring to you the latest in on-chain cryptocurrency analysis. We look at the blockchain directly and analyze balances, transactions, and the overall activity of market participants. This gives us a unique insight into the future of the market.

This section is written in conjunction with IntoTheBlock (ITB).  ITB is an intelligence company that leverages machine learning and advanced statistics to extract intelligent signals tailored to crypto-assets. IntoTheBlock tackles one of the hardest problems in crypto: to provide investors with a view of a crypto asset that goes beyond price and volume data. 

The Wolf Den research team uses IntoTheBlock to dig deeper and get the most important insights about the crypto market.

It is becoming harder and harder to argue that we are not in a bear market. Prices for Bitcoin and Ethereum are down approximately 60% from their highs and many smaller assets have dropped over 80%. But one thing that is important to recap is how some key indicators continue to grow, especially the transition from short term holders to long term holders

Hodlers Double Down — investors with long-term horizons grow their holdings during bear markets

While it is clear that crypto is not for the faint of heart, it shares similar patterns with other technologies in their early stage as was the case with internet stocks. It also has similarities within the industry’s cycles beyond just volatility. Overall, we observe a smaller decrease in on-chain metrics, continuous growth in developer activity and long-term investors doubling down yet again.

Forever 30K, I want to be forever 30K. Do you really want to be 30K forever? Forever. Forever.

Bitcoin, so exciting, much wow.

I hesitate to even post charts, because what is really the point? I am sure we all have better things to do right now, like watch paint dry or the grass grow, cut our toenails or read War And Peace backwards. In Swahili.

Boring market, sideways chop.

The only marginally interesting thing that I can find is the Bollinger Bands on the daily chart, which are extremely tight, an indicator that volatility is likely. They rarely remain this tight for this long, so perhaps CPI numbers tomorrow and some excitement in legacy markets could trigger an event. Currently, price is trading above the centerline of the bands, meaning that it is slightly more likely that the next move would be up than down.

That’s all I’ve got for you.

Key events to watch this week:

Some of the main moves in markets:

Ethereum developers are a step closer to the merge with Ropsten proving to be an early success. For those unaware, Ropsten is the name of a test network to simulate the merge Ethereum will undergo this year. It’s a dress rehearsal for the real test and, to date, our best indicator that the merge will work. In a live stream during the “simulated merge,” Vitalik Buterin said the following.

It’s a great time to celebrate the early success, but far too early to start celebrating victory. Don’t be this guy.

Singapore’s ADDX, a private securities platform, became the first firm in the city-state to recognize crypto to determine “accredited investor” status. This is a small step in the right direction. Eventually, Bitcoin, Ethereum, stablecoins, and maybe other major coins will be legally considered as a part of an individual’s net worth to determine accredited status. But until then, we struggle and complain.

Today we are joined by James Putra, Vice President at TradeStation Crypto, and Eric Weiss, who was the original person to orange pill Michael Saylor. We sit down to discuss why they both moved to Miami for crypto, the impact of the Russian and Ukraine war on the market, the education system and crypto, and more.

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