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The Bitcoin halving event, which is scheduled to occur on Saturday, is a somewhat mysterious phenomenon that occurs every four years, and should, in theory, provide a major tailwind to the flattening of Bitcoin prices in recent weeks.
It's a big week for Bitcoin.
important facts
This halving event refers to the 50% reduction in new Bitcoins available each day to digital miners, who unlock tokens on the blockchain through a complex and energy-intensive process. ”
Halvings have previously occurred in 2012, 2016, and 2020, and are programmed directly into the Bitcoin ecosystem to occur every four years, with the fourth halving occurring on Saturday. Widely expected to arrive within the next few days, it will reduce the amount of Bitcoin that can be mined each day. From 900 to 450.
There are currently 19 to 20 million Bitcoins in existence, but only 21 million tokens have been programmed so far, and the halving will limit the supply of Bitcoin and keep the decentralized currency a store of value. is designed to.
By reducing supply, some expect the 2024 halving to boost demand for Bitcoin and cause its price to rise, but this came on the heels of three other events.
Bitcoin rose 8,069% in the 12 months after the 2012 halving, 284% after the 2016 halving, and 559% after the 2020 halving. Sevens Report analyst Tom Essay said the rise in Bitcoin prices after the halving is “just economics 101.” He explained that unless demand decreases and new supply decreases, “the only thing that moves is price.”
Contra
It is by no means a given that demand for Bitcoin will remain stable or increase, and the three halving data points alone do not clearly declare how Bitcoin price will move during this halving cycle. This is not a sufficient trend. It's often difficult to scrutinize the opinions of Bitcoin detractors and enthusiasts, but the former suggests that Bitcoin is already overvalued given its limited use. I understand. But Bitcoin's ridiculous market-beating returns in recent years are hard for even the most pessimistic to ignore. The $61,000 per Bitcoin acquired on Wednesday is roughly seven times the 2020 halving price, 90 times the 2016 level, and 4,000 times the 2012 level.
So why is the price of Bitcoin falling?
Bitcoin is about 17% below its all-time high of $73,768 hit last month, and its 10% drop on Saturday after Iran launched a drone attack on Israel is a sign of the vulnerability of the bull market. Illustrating the properties. Bernstein analyst Gautam Chughani told clients on Wednesday that this is actually a “new demand driver” that overlaps with past halvings that drove price increases, adding to the current cycle's catalyst. explained that it had actually already happened. New capital dollars flowing into Bitcoin were the biggest contributor to the positive price movement as Bitcoin continues to rise nearly 300% since the beginning of last year. Chugani predicts that Bitcoin will reach up to $150,000 next year, which is a very bullish prediction and more than doubles its all-time high.
tangent
While the halving appears to be a boon for Bitcoin holders, it poses a major challenge for miners, given that it literally cuts their potential revenue stream in half – if regulations allow McDonald's to sell Big Macs. , imagine if they didn't allow the sale of french fries. Three of America's most prominent publicly traded Bitcoin miners, CleanSpark (up 38%), Marathon Digital (down 36%), and Riot Platforms (down 48%), have all underperformed Bitcoin this year. Chugani pointed out, adding that half-life could come into play. That's actually a good thing for investors, as the pressure can lead to companies consolidating and improving profitability.
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