Crypto Hedge Fund Guru Says Bitcoin (BTC) and Ethereum (ETH) Supply Shocks Will Surprise Many Unsuspecting Traders

The CEO of the cryptocurrency hedge fund Three Arrows Capital says crypto traders and analysts are underestimating the impact that Bitcoin’s halving will have on the market.

Su Zhu says he expects next month’s halving event, which is set to cut the supply of new BTC in half, will trigger a significant supply shock that increases buy-side pressure. Zhu tells The Block that he believes the halving is no longer priced in after Bitcoin’s plunge to its current level of around $7,000.

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“I think at this point it’s not priced in. I think it was arguably priced in a few months ago from the point of view of the leverage, but then the spot buying not coming in. I think once the halving comes through and people see there’s less supply coming on the market, there’s going to be quite a big supply shock…

I think ultimately people will be surprised by how little supply there can be if we go into a run, and then new money comes buying in as well.”

In addition, Zhu says concerns that Bitcoin miners are in a dire position as the halving approaches are overblown, and large miners are in an especially solid position with plenty of spare collateral to go around.

As for Ethereum, Zhu says his firm is seeing high-net worth individuals taking a renewed interest.

He says ETH is significantly underpriced and believes a proposal that would burn ETH each time a transaction is processed will be implemented and will likely trigger a separate supply shock in the second-largest cryptocurrency.

“I can say in the high net worth space that we see in Asia, there’s serious interest in Ether because I think it’s actually easier to understand for people in that space. They say Bitcoin is digital gold, I’ll buy some of that. But with Ether, do I own a piece of what powers a global settlement layer? It’s almost like owning digital commercial real estate. This is a somewhat scarce commercial real estate and you get paid some kind of yield on it from fees or staking or whatever it is to partake in the network.”

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