A slowdown in purchases of Bitcoin exchange-traded funds (ETFs) combined with a high volume of unrealized gains from traders could lead to bearish pressure on Bitcoin (BTC) price following the halving event.

According to Julio Moreno, head of Research at CryptoQuant, traders’ unrealized profits from Bitcoin’s recent rally are building up a selling pressure. An eventual slowdown in the purchase of ETFs in the coming months could result in further pressure on BTC prices.

CryptoQuant’s Net Unrealized Profit and Loss (NUPL) indicator supports the analysis. The indicator’s warning sign is the 0.7 mark, indicating that Bitcoin investors may be ready to take profits, further driving prices down and increasing selling pressure.

On March 17, the NUPL indicator reached 0.606, up 0.41% from the previous 24 hours, despite recent BTC price corrections.

“For a bearish outlook for price: 1. Slowdown in ETF Bitcoin purchases and 2. getting into the halving at high level of unrealized profits for traders, as highly likely traders would sell to take profits,” said Moreno about possible price-depressing events.

The Bitcoin ETFs recorded one of their lowest net inflow days on March 14, with just $132 million in net activity, their lowest level in eight trading sessions and an 80% decline from the previous days.

A possible downward trend, however, may not be as severe as previous bear markets as institutional investors typically engage in portfolio rebalancing strategies, which could temper volatility rather than increase it, James Butterfill, head of Research at CoinShares, told Cointelegraph.

“Volatility in the last bull market in 2021 was 120%. It is now only 45%, and prices have risen above all-time highs. We believe this is due to the dampening effect of portfolio rebalancing,” he said.

Bitcoin ETFs have so far been in high demand. The cumulative net inflows into the crypto products surpassed the $12 billion mark on March 15, while industry insiders anticipate further demand as brokerage firms speed up due diligence to offer clients Bitcoin ETFs.

Miners brace for impact

Capital flowing through Bitcoin ETFs is counteracting the negative price effects of miners’ sales ahead of the halving — Bitcoin’s deflationary mechanism.

The halving cuts the reward for mining new blocks by 50%, thus reducing the rate at which new Bitcoin are generated. This year’s reduction will slash Bitcoin miners’ rewards from 6.25 BTC to 3.125 BTC per block.

The cost of mining, however, remains the same or may even increase as miners usually improve operations to remain profitable after the event. CoinShares anticipates the average cost of production post-halving for crypto miners to be at $37,856.

“Looking at price performance of the miners year to date highlights investor concerns for the miners around the halving, but I believe many are being tarred with the same brush, so to speak, as average costs to mine Bitcoin vary greatly, but those with higher costs to seem to have been hit harder,” said Butterfill.

Historically, miners sell more of their BTC reserves before halving to maximize profits and this year is no exception. Data from CryptoQuant shows miner reserves at the lowest level in two years, with 1.81 million Bitcoin on March 15.

The Bitcoin halving takes place every four years, with the next event expected to happen around April 19, 2024.

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