Demand has been the driving force behind bitcoin in recent months, but now supply may be taking over. The hype around a planned reduction in bitcoin supply this month is spurring debate over whether this adjustment will send prices higher, enhance mainstream adoption, or prove to be just a blip on the radar.
The pre-programmed, quadrennial event ultimately cuts in half the number of new coins that can be earned by bitcoin miners. With the recent regulatory approval and launch of 11 spot Bitcoin ETFs, there is the potential for this third halving in bitcoin’s 15-year history to be different. That’s because the new ETFs have spiked bitcoin demand and fueled a market rally ahead of the planned cap on new supply.
For institutions (including ETF issuers, exchanges, brokerages and more), the halving brings a new responsibility for communicators to educate an influx of novice investors about this volatile and still-nascent asset class. It also provides a high-profile opportunity to bolster trust at a time when crypto is building momentum but still facing lingering reputational challenges.
Institutions need to be proactive in their communications before, during and after the halving to instill confidence among digital asset investors. Below are recommended strategies firms can use to build credibility and shape perception during this period of opportunity.
Reach Retail Investors Where It Matters Most
While the halving may impact bitcoin’s value, it won’t have any direct effect on ETF holders. Satoshi Nakamoto, the presumed pseudonymous creator of bitcoin, set a supply limit of 21 million units to guarantee that the issuance of new tokens wouldn’t devalue the currency. To date, spot bitcoin ETFs account for 4% of the total supply, according to recent BitMEX Research.
Historically, halvings have occurred during bitcoin’s march to new all-time highs. Even though the halving is a predetermined event (it’s expected to occur around April 20), and therefore not a surprise to the market, the supply shocks typically generate enhanced interest within the crypto community. Over time, halvings have made long-term holders increasingly important because the amount of bitcoin held on exchanges continues to diminish.
The challenge for institutions is to ensure they’re effectively reaching those investors who are new to digital asset investing and likely don’t hold any other crypto assets. If they’ve never experienced a halving cycle, they may be searching online for information about what it means, how it will impact their holdings, and whether they should move their funds.
Spot Bitcoin ETF issuers should be proactive in publishing content on their websites, blogs and social channels and hosting explainer webinars. Likewise, they should seek opportunities to engage media that are covering the halving, offering perspectives on the implications of the event for current and prospective spot Bitcoin ETF investors. Given this cohort is less likely to turn to traditional crypto media for such counsel, personal finance-focused outlets like Forbes or CNBC will become mandatory targets.
Institutions can even go so far as targeting and re-targeting this content to investors through platforms such as LinkedIn, Facebook, and Instagram to ensure it reaches them. This approach will enhance the ability to forge trust with this audience.
Beyond engaging with investors digitally, institutions should also be deliberate about reaching out directly through their clients’ preferred channels, whether that be email, the firm’s investment portal or encouraging these individuals to consult with a qualified advisor.
Make No Assumptions
Institutions communicating to spot bitcoin ETF holders, particularly novice investors, should develop messaging that reinforces that the halving, while a unique feature of the asset class, represents a single moment in time and a technical event at that. Past performance, as always, isn’t indicative of the future. More institutional players offering bitcoin investment vehicles means that the prospect of more dramatic or less frequent price swings is possible.
It is critical to develop a content strategy that emphasizes bitcoin, like all markets, is driven by external forces, including macro factors such as monetary policy, regulatory developments, and supply dynamics. This is key to ensuring a new investor base is both well informed and prepared for the questions that may come.
The bottom line is that institutions need to be proactive in their communications before, during and after the halving to instill confidence among this new class of digital asset investors. Spot bitcoin ETF holders need to hear directly from issuers on the channels that they frequent. As crypto investing continues to mature, doubling down on opportunities to educate novice investors is more important than ever.
--Brett Philbin (brett.philbin@edelmansmithfield.com) and Rosie Gillam (rosie.gillam@edelmansmithfield.com), Executive Vice Presidents