Bitcoin and Ether ended Thursday in the red, but Ether has soared more than 100% since mid-June.
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Just a few years ago, Bitcoin's halving was something celebrated only by early crypto enthusiasts, who swore it was a core feature of a revolutionary, anti-establishment, deflationary asset.
Today, Bitcoin is accepted by the biggest financial institutions on Wall Street and continues to attract curious retail investors with each cycle. From the overjoyed to the bemused to the unimpressed, crypto market watchers know this “halving” is coming and it must mean something good for Bitcoin. There is.
This is a technical event that occurs on the Bitcoin network approximately every four years and reduces the supply of cryptocurrencies by half, creating a scarcity effect that turns cryptocurrencies into “digital gold.” Historically, this sets the stage for a new cycle and bull market, but this time it's a little different.
“The halving is the ultimate geeky event for Bitcoiners, but the 2024 iteration will take it to the next level, as reduced supply and new ETF demand combine to create an explosive cocktail,” said crypto exchange Nexo. Co-founder Antoni Trenchev said. “What makes this halving unique is that Bitcoin has already surpassed the previous cycle's high, something that had never happened before the once-in-four-year event. That makes it very difficult to predict the length and ferocity of this cycle.”
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Bitcoin (BTC) will enter its fourth halving next week.
After the 2012, 2016, and 2020 halvings, Bitcoin price rose approximately 93x, 30x, and 8x, respectively, from the halving price to the cycle high. Past performance is not indicative of future returns, and warns that the days of halvings that have a big impact on Bitcoin prices are likely already behind us as we deal with a quadrennial decline in supply. There are even people.
But Stephen Lubka, head of private clients and family offices at Swan Bitcoin, said “if there's ever a time to be a little more optimistic about returns after holding, it's this year.”
“This Bitcoin bull cycle started early with the approval of spot ETFs in January, but it will likely become shorter and more explosive, potentially peaking in late 2024 or early 2025.” added Trenchev.
Whether you want to understand more about Bitcoin as a new deflationary asset or simply want to speculate on Bitcoin price in the coming weeks, here's what you need to know about the halving and its potential impact on the market. That's right.
what's happening?
A halving occurs when the incentives for Bitcoin miners are cut in half, as mandated by the Bitcoin blockchain code. It is scheduled to run every 210,000 blocks, or approximately every four years.
As a refresher, miners run machines that do the work of recording new blocks of Bitcoin transactions and adding them to the global ledger, also known as the blockchain (essentially solving very complex math problems). Masu.
Miners have two incentives to mine. One is the transaction fee paid voluntarily by the sender (for quick settlement), and the other is the mining reward. As of Thursday morning, the newly minted he was worth 6.25 Bitcoin, or about $437,500. Sometime between April 18th and April 21st, the mining reward will be reduced to his 3.125 Bitcoins. The incentive was initially 50 Bitcoins, but in 2020 he reduced it to 6.25 Bitcoins.
A decrease in block rewards will lead to a decrease in the supply of Bitcoin by slowing the pace at which new coins are created, making it possible for Bitcoin to become digital gold (its finite supply helps determine its value). helps maintain the concept of Ultimately, the number of Bitcoins in circulation will be limited to 21 million per Bitcoin code.
Current and future market impact
Halving is not like an on-off switch that flips at a specific time. If there is no significant action in the market, it is natural to think that day will come. Of course, it is certainly possible that volatility is caused by speculators trading based on this event. Swan's Lubka cautioned that investors shouldn't confuse that with technological change taking place.
“I don't think we're going to see a big move one way or the other, but even if there was a big move, it mechanically has nothing to do with the half-life,” he said.However, “I spent the next few months there every day. [will be] Approximately $30 million, excluding Bitcoin, is sold. It can accumulate quickly and have effects over a period of time. ”
This $30 million assumes a Bitcoin price of approximately $70,000.
Lubka said one of the big things investors need to understand about the halving and its potential impact on the market is that miners are selling much of the Bitcoin they receive to pay their daily bills. He said.
“These are very expensive businesses, and they have to consume a lot of energy and other things to get their work done,” he said. “Miners are constantly selling the Bitcoins they mine just to cover their costs. If that's cut in half, there's nothing you can do about it. The amount of Bitcoins sold by miners is cut in half.”
“They are the most regular sellers,” he added. “Some hedge funds may sell positions…but miners are selling in predictable quantities daily, weekly, and monthly. That pressure is cut in half.”
Revenue decreased from half to half
Bitcoin always reaches the moon in the months following a halving, which is why this day is so celebrated among enthusiasts. However, each time the mining reward and Bitcoin supply decreases, the return from halving to cycle top also decreases.
“Guessing the endgame for Bitcoin after every halving is the ultimate sport,” Trenchev said. “What we do know is that each bull market since the halving has had diminishing returns.…Even just doubling would leave Bitcoin at about $130,000, which is laughable. It’s not a thing.”
Lubka said that trend could reverse this year. However, this will not be the result of a planned supply shock, but rather a new demand shock. According to CryptoQuant, demand for cryptocurrencies is higher than ever thanks to the advent of Bitcoin ETFs.
Data shows that historically, after each halving, there has been a spike in “whale” demand for Bitcoin, pushing the price higher. But this year, demand from whales, including OG Bitcoiners, new investors, and Bitcoin ETF holders, is already at an all-time high, and block rewards have yet to be cut.
“The once significant impact of the Bitcoin halving on price has diminished as new Bitcoin issuance is now lower relative to the total amount of Bitcoin available for sale,” Moreno said. . “In contrast… growth in demand for Bitcoin appears to be the main driver of the post-halving price increase.”
