The Practical Islamic Finance Podcast

Bitcoin Halving: Sell the News?

March 22, 2024 Rakaan Kayali
The Practical Islamic Finance Podcast
Bitcoin Halving: Sell the News?
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Bitcoin Halving: Sell the News?

In this episode, we discuss:

  • The upcoming Bitcoin halving event and its potential impact on the market.
  • Explain the basics of the halving, historically affecting Bitcoin's supply and demand.
  • Highlight the influence of Bitcoin ETFs on the market, which may lessen the halving's impact on supply.
  • Analyze recent trends in Bitcoin ETF inflows and outflows, noting retail trader support despite weak ETF demand.
  • Address high fees in GBTC and its effect on investor behavior.
  • Compare the current halving event with previous ones, suggesting a potential sell-off afterward based on historical patterns.
  • Advocate for a balanced approach, advising against selling entirely and holding some cash to take advantage of potential dips.
  • Address audience questions on topics such as Bitcoin miners, Islamic finance options, and investment strategies.
  • Emphasize focusing on the long-term potential of Bitcoin and making informed decisions rather than reacting to short-term fluctuations.



Our podcast is about helping people ethically build wealth. We cover a broad range of topics including stock and crypto investing, product reviews, and general financial well-being.


Anything you hear in this video is an opinion. It is not personalized financial advice. Make sure you do your due diligence before making any investment decisions.

As-salamu alaykum everyone, I hope you are doing well. It is Thursday and Bitcoin is just above 65,000. So we had around a 2% drop since yesterday, since yesterday's recovery. And I got an interesting question in our Discord regarding the halving. And what should we do with regards to the halving? Is it a seldom news event? So I will look at the history of the and look at some data points around Bitcoin and tell you guys what I will do personally with regards to the halving. And without further ado, let's get started. As always, this is financial advice. Be sure to do your own due diligence before making any investing decisions. And leave a like if you enjoy these lives. Alright, so the halving is in less than one month. So the predicted date right now is April 20th. So may differ a day or two depending on who you ask. But that's the range, inshallah. And the halving corresponds with the output or the rewards that Bitcoin miners get falling in half. So right now I think it's 900. The Bitcoin issuance is going to fall to 450. And as-salamu alaykum everyone. And typically, you know, economics 101, when supply falls and demand, assuming demand stays the same, or it rises, the price will rise. So in previous halvings, this has been a really big deal, the halving, because from a fundamental perspective, it meant that there was a lot less supply, meaning demand. However, this time around, things are a bit different. So if you look at this chart, you can see at the bottom, these orange bars, these short orange bars, that represents the Bitcoin issuance daily. Now compare this with the gray is the Bitcoin price. But compare this with the blue line. And that's the intake of the Bitcoin ETFs every day. So you can see that on every day, the intake of the Bitcoin ETFs basically dwarfs the amount of Bitcoin issuance. And so even if Bitcoin issuance is going to fall in half, the Bitcoin ETFs and their intake is really what runs the show. Whether that's, you know, substantially positive or negative is what is going to exert the most influence on the price of Bitcoin. Now, even though the Bitcoin halving may not have a profound impact on supply, comparatively speaking, it may still have a profound impact on demand for psychological reasons. Because people, even though, you know, Bitcoin ETFs are having a greater impact, people may simply perceive it as being a big deal. And it's very hard to predict what people's psychology is going to be around the halving. So we've seen that recently this week, Bitcoin ETF net inflows have actually become outflows. And we actually had, you know, some of the weakest inflows since the launch of these ETFs. And yet we had a recovery in the price of Bitcoin yesterday. And I think that is partially due to people anticipating the bull run that has historically been associated with the halving. And so a lot of people who wanted to get into Bitcoin and perhaps were waiting for a pullback got into coin. I'm talking about retail traders got into Bitcoin yesterday and that supported its price. So even though ETFs were not doing so hot, retail picked up the slack. And so we saw the Bitcoin price recovery yesterday, despite the weakness in demand for ETFs. Now, if you're wondering why there was weakness in demand for ETFs, well, that was basically a result of GBTC and their greed, keeping fees as high as, you know, five to six times the other Bitcoin ETFs, hoping that people were basically their customers that trusted them were basically locked in to their GBTC because if they sold, they had to pay a lot of taxes. Well, people, I think rightly so calculated that, you know, Bitcoin keeps going up in price. These, you know, 100 basis points difference between what GBTC is charging me and what these other Bitcoin ETFs are offering. This difference is going to be greater and greater because their management fee is a percentage of the total value of their holding. So that number is going to get greater and greater and it's going to compound over time. So let me get out now before Bitcoin becomes, you know, 200,000. So I think a lot of people were thinking along those lines and they've been getting out in the last week. And so far, GBTC now has half the number of Bitcoins they had when the Bitcoin ETFs were launched. So I think they're paying the price of their greed. And eventually, though, if this continues, they'll end up having to lower their fees anyway. Now, because of this sort of hybrid motor behind Bitcoin's price, that is the retail demand and institutional demand that now has access to Bitcoin through the Bitcoin ETFs. This cycle around, we're seeing more muted drawdowns. So the typical drawdown has been between 10 and 20 percent this cycle, whereas with previous cycles, we've seen drawdowns that, you know, exceeded 50 percent and 60 percent in the last drawdown. So we're seeing the maturation of coin as an asset and also the fruits of the Bitcoin ETFs play out. And this makes betting on a drawdown less and less appealing. And so if we look historically in 2016, we can see that the halving was indeed a sell-the-news event. So you can see these orange bars, they represent the daily Bitcoin issuance, and that fell to half its level. And, you know, shortly after having the price of Bitcoin dipped, it dipped by the way from like $700 and change to $500 and change. So imagine that you could buy a Bitcoin for $500. Imagine that only, you know, less than 10 years ago. And in 2020, investors wised up and they figured out, well, we're going to front run this halving. And so you can see the Bitcoin price in black here actually dipped before the halving. So a lot of investors figured, you know, they were the smart ones. They weren't going to wait for the halving and experience the drop like what happened in 2016. So they got out before the halving and the price recovered sharply when the halving happened. And then obviously, you know, compared to the halving, we made substantially higher highs for the next year. And so the price performance since the all-time high Bitcoin here in its most recent cycle in black seems to correspond quite closely with the previous two cycles in blue and red. And so we are seeing that history is rhyming. And the reason why I point this out is that if you look at the short term around the halving, it's very hard to ascertain, okay, when is the dip going to come? Is it going to come before the halving? Is it going to come after the halving? Is it going to at all? Maybe the dip that we just experienced is the pre-halving dip. It's really hard to tell. Although I think that it's not unreasonable to assume, I think this is a pretty safe assumption that a lot of traders are looking at this halving event as a sell the news event. And so I suspect a dip around the halving, although you cannot be certain of these things. And therefore, I think what a reasonable strategy is, if this is something that irks you, bugs you, and you want to play it, I would definitely not sell and wait for the dip, especially considering the drawdowns have been a lot more muted recently. Maybe if you want to keep 10 to 20% in cash and that way, if things continue to go up, you're fine. You're 80 to 90% invested. If things actually do experience a dip, then you could take advantage of that with a non-trivial amount that you've set aside. So I think that would be a more wise approach than selling out entirely. And the last thing I want to say is that if we zoom out, so if we don't focus on the halving necessarily and we zoom out, it's clear that we're still early. Every model that we look at tells us that we're still early. So if you just remember that the price dropped from 700 to 500. Now, do you care if you were to go back in time and I would say, hey, you have an opportunity to buy at 500 or 700. Do you really care? I mean, it's basically the same for you at this point. I mean, you would jump at that opportunity. And I think the same is true with the price of Bitcoin. So, you know, maybe it drops 10% or 20% or whatever. Five years from now, you're going to wish that you had bought at these prices if you hadn't bought already. And so, you know, whether you're able to take advantage of a 10% dip or 20% dip shouldn't really keep you up at night. I think what's important is that you don't mess this up and sell your Bitcoin and just ignore the noise of the daily fluctuations because they really can't be predicted. So with that, be sure to become a PIF member if you aren't already. We have a great community of Halal conscious investors trying to do the right thing, both ethically and from a financial perspective. So we'd really love to have you. Let's take some questions. Yes, I did grow hair. SubhanAllah, when you go to Turkey, all of a sudden your hair starts to grow. Thank you. Appreciate that. Do you think the miners will tend to 15x this bull run? I think they will probably out gain Bitcoin on a percentage basis, but it depends on which miners, obviously. So there are some higher quality miners than others. So if you're in the right ones, I think they will probably do better than Bitcoin because they're like a leverage play on Bitcoin. If the price of Bitcoin increases 10 percent, the operating income for a Bitcoin miner may increase 20 or 30 percent. Thank you for all your videos. You're welcome. I want to ask about UIF, which is an Islamic organization that helps with buying a house here. Perhaps I can review them in a separate video. I will say that I did make a video about guidance and I also made a video about mortgages in general, which was our response to another video about Islamic mortgages. So I would check those out. And I think they will really inform your decision with regards to any other player if they have a similar model. Do we have any option in PIF membership which can beat S&P 500? Well, you cannot really predict the future or guarantee the future. And anyone who tells you they have guaranteed returns is lying. The future really can't be known by anyone except for Allah. But I do suspect, I expect that our PIF portfolios will beat the S&P inshallah. And it won't be close inshallah. Is it really a halal option to own a house? It's a tough question, perhaps for a different video inshallah. Any prediction about Solana? Yeah, I mentioned yesterday, I thought that there was a non-trivial chance, there is a non-trivial chance that Solana flips Ethereum. I think that's, I think there's a there's a material chance that this happens, this bull run. Because really, if you've used both blockchains, there's really no comparison. Solana is clearly superior. I don't really think there's a fundamental reason for Ethereum to be valued more over time. Would linking US dollar with gold affect the future price of BTC? Yeah, that's not going to happen. I would certainly make the US dollar stronger, less inflationary. But with $35 trillion in debt, no one's linking the dollar to gold. They need to pay off that debt. And that's not going to happen without inflation. As-salamu alaykum, Akinan Mut, Crypto Bin. I think one to two years, the part that got me in the chart. I'm not sure what that is. I'm sorry, I'm not sure what you're asking. What are your thoughts on the Stoshi wallet holding 5% of all Bitcoin? So this brings up a good point, which is that Bitcoin is compared to like for all of its benefits compared to fiat. It really is, you know, tough to argue for it as a currency considering its concentration. The concentration of Bitcoin is too high. And that may actually get worse with time. So Bitcoin is designed to go up in price, which means that people are going to hoard it. And so you're going to see a lot more concentration. But if I think, you know, Stoshi wallet holding 5% of all Bitcoin is necessarily an existential threat to Bitcoin. You know, if you sold this 5%, I imagine that it will be absorbed relatively easily by the market. Any thoughts on Casper and their dev views on Israel? Interesting. So this brings up a point. So an interesting point. So I'm not going to talk about Casper in particular because I haven't really done a deep dive on it. But as it relates to like people expressing views, like, okay, a dev expressed the view. I wouldn't necessarily, you know, put much weight on that. What I care about is what is actually impacting people. And I also don't like giving people that shouldn't be that important a lot of importance. Now, this may, I don't know how this is going to sound, but it kind of gives you insight into how I think about these things. Like when some nobody decides to burn the Quran, right? It's just a nobody. He's never amounted to anything in his life. There's no proof of him actually having any impact on anything. And he wants to feel important. He goes out and he burns the Quran. Okay. The response to that is that Muslims around the world go out and they protest and a lot more incidentally than they protest from like actual, you know, bombing of Gaza that happened a lot more, you know, even people die in these protests. And it's like, well, should we be giving this person who doesn't represent anyone represents himself, doesn't have any impact on anything so much importance. And I think the answer is probably no. So the same, the same is true with like assets. A lot of time I'll get questions about, oh, Hey, you know, the VP of so-and-so company said, said something pro-Israel. Let's boycott the entire company. I was like, I think that's probably, you know, not the right response. First of all, the company in question may, may have like, it's a big company. It may have, the VP is often no offense to anyone who is a VP, but oftentimes people will, companies will promote someone, give them a much, I guess, weightier title, position title and a small bump in pay. And, you know, hopefully the bigger position title, you know, compensates or distracts the person from the small bump in pay that they got. So, you know, you can have some companies have thousands of VPs, how VP isn't, and it's not necessarily one VP. So, you know, I would say make sure that you're, you know, make sure that you're not putting too much weight on what people say and put more weight on what is the actual impact of the asset that I'm considering? Is it positive or negative? Is it hurting anyone or is it not hurting everyone? Is it actively supporting an oppressor in a material way or is it not? And focus on that. I think we'll come out with better conclusions. Thanks. I appreciate that. Yeah. Leave a like, brother. Yeah. Well, you can't always be like that cool every time. Then it just sort of dilutes coolness. It's no longer special. So, all right. Jazakumullah khair everyone. Thank you for coming. I appreciate it. I hope you're, I hope you're having a blessed Ramadan until next time. Take care of yourself.

Introduction and mention of the upcoming Bitcoin halving event.
Explanation of the basics of the halving and its historical impact on Bitcoin's supply and demand.
Discussion on the influence of Bitcoin ETFs on the market, potentially lessening the halving's impact on supply.
Addressing high fees in GBTC and its effect on investor behavior.
Analysis of recent trends in Bitcoin ETF inflows and outflows, highlighting retail trader support.
Comparison of the current halving event with previous ones, suggesting a potential sell-off afterward.
Advocacy for a balanced approach, advising against selling entirely and holding some cash.
Addressing audience questions on Bitcoin miners, Islamic finance options, and investment strategies.