Bitcoin halvings have long been seen as a bullish event for the cryptocurrency market. The upcoming halving, expected in April, holds the potential for an even more favorable outcome than those seen in previous cycles, as noted by crypto-market observers.
Understanding the Halving Process
The halving mechanism is integral to the Bitcoin blockchain’s algorithm, designed to regulate the coin’s supply. With a total cap of 21 million coins, halvings involve cutting the reward for bitcoin mining in half. This translates to miners receiving 50% fewer bitcoins for verifying transactions.
Timing and Impact
Halvings occur after every 210,000 mined blocks, approximately every four years, until the predetermined maximum supply of bitcoin is exhausted. Historical data suggests that Bitcoin tends to experience price appreciation in the months following halving events. The next halving is projected to take place on April 19, according to Swan Bitcoin.
Converging Factors
This upcoming halving is marked by a unique set of circumstances in Bitcoin’s history. Portfolio manager Cosmo Jiang of Pantera Capital highlights the intersection of factors affecting both the supply and demand sides of the cryptocurrency. The control of bitcoin supply through halvings coincides with increasing demand fueled by steady daily inflows from bitcoin exchange-traded funds (ETFs).
ETF Approval
A significant development contributing to increased demand for Bitcoin is the approval of 10 bitcoin ETFs by the U.S. Securities Exchange Commission in January – a historic first. This approval signifies a shift in how crypto assets are traded, reflecting a growing mainstream acceptance and adoption of Bitcoin.
Recent Institutional Participation Boosts Bitcoin Towards Record High
Increased institutional participation has recently driven bitcoin to a level close to its all-time high, less than 50 days ahead of the anticipated halving date. With a rally of more than 40% this year, the price of bitcoin now hovers around $62,600, standing less than 10% below its peak of $68,990 achieved in November 2021.
Unique Run-Up Before Halving
This current surge in bitcoin’s value leading up to the halving differs from its historical patterns, as highlighted by Martin Leinweber, digital-asset product strategist at MarketVector Indexes. Traditionally, bitcoin’s performance has shown relatively subdued movements in the two to three months before halving, observed Leinweber.
Enhanced Security of Bitcoin Blockchain
Adam Swick, chief growth officer at Marathon Digital Holdings Inc., a bitcoin-mining company, indicates that the Bitcoin blockchain now boasts heightened security compared to previous halving events. The total hash rate, representing the blockchain’s computational power, soared to a record high of approximately 600 million terahashes per second in February, according to data from Blockchain.com.
This heightened security helps alleviate concerns surrounding the blockchain’s safety post-halving, given that some miners could be compelled to cease operations when their rewards get halved, as noted by Swick.
Potential Price Volatility Amid Uncertain Macro Conditions
While the halving typically bodes well for bitcoin’s value, the cryptocurrency’s price tends to be highly volatile amid uncertain macroeconomic circumstances. This may hold true in the current environment, where investors are anxious about potential stagnation in disinflation progress and an ambiguous timeline for interest rate cuts by the Federal Reserve.
Michael Novogratz, chief executive at Galaxy Investment Partners, a crypto investment firm, recently mentioned on Bloomberg TV that bitcoin could experience “some corrections” in price before embarking on a journey towards new all-time highs.