So far, 2024 has been the year of Bitcoin ETFs, with interest in a new spot Bitcoin ETF triggering a series of crypto rallies, with the original cryptocurrency hitting its highest in March for the first time since November 2021. has been updated. The halving event is currently scheduled to occur around April 20th, but many experts say this may be just the beginning of BTC's parabolic growth.
Anticipation for the Bitcoin halving event is high, with major crypto-focused platforms such as CoinGecko even launching their own halving event countdown clocks as the big day approaches.
If the aggressive rise in BTC prices attracts more Bitcoin mining and accelerates the creation of new “blocks” on the BTC blockchain, the date of Bitcoin halving could theoretically be brought forward. However, this seems unlikely as prices have fallen by 2.1%. Past 7 days. A block is a file that stores 1 megabyte worth of Bitcoin transaction records.
Some investors expect the halving to help the globally popular digital currency reach new heights in the coming months. At least, that's how Bitcoin has traditionally responded to this event, which occurs every four years. After the previous halving, Bitcoin's value eventually reached a record high of over $69,000 in November 2021, but fell more than 70% amid a significant market downturn. did.
Fueled by record spot Bitcoin ETF inflows of over $1 billion on March 12, BTC prices soared into uncharted territory, surpassing the $73,000 level a day later. While some crypto investors are looking to use halving events to push crypto values up again, volatility is also a reason for caution. Also, there is not necessarily direct evidence that past halvings drove Bitcoin prices higher, as other market conditions inevitably come into play.
But looking at past market movements, what is the rationale behind Bitcoin halving causing a rally in cryptocurrencies? A closer look at the unusual cyclical behavior within the notoriously volatile cryptocurrency ecosystem. Let's.
Bitcoin's halving event is a relatively simple concept, which is largely responsible for the cryptocurrency's scarcity and complex underlying technology.
When a halving event occurs, you guessed it: the rate at which new Bitcoins are created is reduced by half. This is a pre-programmed feature within the coin's technical framework and is an active anti-deflationary measure that controls the circulation of assets. Half occurs for every 210,000 blocks mined.
How would cutting the rate of Bitcoin creation in half lead to a rise in the cryptocurrency market? Now we'll get a little more technical.
Bitcoin is a cryptocurrency built on the “proof of work” (PoW) algorithm. This means that coins can be “mined” using computational power to verify BTC transactions by solving complex equations to arrive at the hash rate required to confirm transactions on the blockchain. Masu. The first miner to reach the required hash rate updates the blockchain, validates the transaction, and receives her BTC as a reward.
When Bitcoin was launched in 2009, 50 BTC was to be distributed for the efforts of miners. However, these rewards were cut in half approximately every four years. In the next halving, the reward for each mined block will be reduced from 6.25 BTC to 3.125 BTC.
This was an important consideration in the development of Bitcoin, which was coined by the pseudonym Satoshi Nakamoto and has an issuance cap of 21 million. At the time of writing, there are 19,673,868 Bitcoins in circulation, meaning we are already close to maximum supply.
However, the distribution to miners will continue to be reduced by 50% every four years, so it could be 2140 before the 21 millionth Bitcoin is mined.
Some experts say it was precisely this slowdown in supply that helped Bitcoin embark on a parabolic price rise in the months following the halving event. Due to the cyclical nature of the underlying technology, we see recurring trends that crypto investors follow within a more general theme of volatility across the crypto industry.
Despite a year marked by the landmark approval of a Spot Bitcoin ETF by the Securities and Exchange Commission, the reason Bitcoin halving is gaining attention among investors is that after the “halving'' The last few months have definitely brought us to a new situation. All-time high for cryptocurrencies.
For example, after the halving event in 2012, when BTC distributed to miners fell from 50 to 25, Bitcoin rose in 2013 from its start-of-year price of $13.30 to a short-term abnormal high of $1,238. .
Similarly, after the halving event in mid-2016, Bitcoin started 2017 with a value just under $1,000. By December 16, 2017, BTC reached a value of $19,345 and remained at an all-time high until November 2021.
With each halving event, there is evidence that the size of Bitcoin's rebound after the halving diminishes, but there is still an opportunity for investors to make a return.
However, it is important to note that each new peak after a halving event is usually followed by a “crypto winter.” This will take the form of a long period of time during which much of the value of Bitcoin and other crypto assets will decline, so the timing of your investment is important.
To corroborate Bitcoin's historical performance following the halving event, you can check the stock-to-flow (S2F) chart of the asset. This illustrates the relative performance of BTC regarding the halving cycle.
Bitcoin's cyclical peak typically occurs when Bitcoin is approximately 800 days away from the next halving event, placing Bitcoin somewhere in the middle of the post-halving cycle.
The consistency with which Bitcoin follows a stock-to-flow model is remarkable given the frenzied state of the crypto industry, and although correlations have weakened in 2022, the post-pandemic recovery, supply It is worth considering the broader economic headwinds that have affected the chain, geopolitics. conflict and historically high inflation at the time.
The prospect of history repeating itself will be music to the ears of crypto enthusiasts, as the S2F model highlighted above predicts a peak of over $440,000 by May 2025.
There are questions about whether such an astronomical rally is sustainable, and Bitcoin stocks and Balancing flows is certainly worth it.
Although Bitcoin often dominates the headlines, the world of cryptocurrencies is rich and diverse. Alternative cryptocurrencies, known as altcoins, are known to rise at an incredible rate after the Bitcoin halving as more funds flow into the ecosystem.
Bitcoin's market power reached 52% as of the end of March, a staggering share in a space populated by thousands of altcoins. This means that when BTC moves, the altcoin typically moves to stay in its orbit.
What's interesting is that while Bitcoin is trading at a high price, the cryptocurrency's market capitalization is nearly $5 trillion below its 2021 peak. This shows that crypto investors can find value in altcoins as they seek to diversify their portfolios.
Virtually every other major altcoin by market capitalization is on track to follow Bitcoin to a new all-time high in 2024, or close to its all-time high since November 2021. With this in mind, reputable and reliable crypto projects other than BTC have the potential to hold a lot of assets. It is valuable for investors who want to consider their options.
Note that for Bitcoin miners themselves, halvings have historically meant a hit to revenue, and miner participation was expected to decline as profits from mining declined. However, an April 5 report from Cointelegraph says that the decrease in mining rewards could now be offset by an increase in Bitcoin network fees paid to incentivize miners.
Looking back at the history of cryptocurrency market capitalization, the market capitalization of the cryptocurrency industry peaked at just under $850 billion in early 2018, and reached approximately $3 trillion in the second half of 2021.
Given the high expectations of investors and stronger levels of adoption by institutional investors, 48% of the total market share of Ether (ETH) and other altcoins is due to renewed interest from investors and institutional investors alike. may benefit from the BTC halving event.
Many altcoins are highly functional, cryptocurrencies and blockchain technology are brimming with innovation, and Bitcoin's ongoing rally is a great starting point for strong projects to find new markets. There is a possibility.
As always, Bitcoin remains the catalyst for growth in the cryptocurrency industry, but in a post-halving upswing scenario, the brightest players in the broader ecosystem will also have a huge opportunity to shine.
