The air is crackling with anticipation as the Bitcoin network races toward its fourth halving expected in the next few hours.
This pre-programmed phenomenon cuts the block reward for miners – the number of new bitcoins generated to verify transactions – in half. While some see this as a recipe for another digital gold rush, experts warn against blind optimism.
Bitcoin rewards decreased, there was no supply
Misconceptions abound before the bisection. Binance co-founder Changpeng Zhao recently clarified that the halving does not reflect a stock split, which increases the total number of shares.
In contrast, a halving reduces the rate at which new bitcoins enter circulation, effectively narrowing the supply. This scarcity is a fundamental principle behind the design of cryptoassets that aim to mimic precious metals such as gold.
Someone asked me if the bitcoin halving is like a stock split… We are still early days. (the answer is no)
Happy halving! pic.twitter.com/gxAvfOpGQH
— CZ 🔶 BNB (@cz_binance) April 19, 2024
Past performance is not a guarantee
History offers an exciting perspective. The previous three halves coincided with significant price jumps. After halving in 2012, Bitcoin witnessed a staggering 9,500% increase.
A decrease in 2016 was followed by a more modest but impressive jump of 3,000% the following year. However, analysts warn against blindly following historical trends. Market conditions and investor sentiment can significantly affect price movements.
BTCUSD trading at $64.381. Chart: TradingView
Bitcoin Halving: Analyst Predictions
Plan B, the anonymous analyst behind the popular Stock-to-Flow (S2F) model, is a firm believer in the bullish effect of halving.
They argue that the upcoming action will follow an established pattern and drive prices higher.
IMO this bitcoin halving will be no different:
– All Bitcoin price increases will be around half again
– Buying 6m before the halving and selling 18m after the halving (green line) will outperform the buy and hold
– BTC > $100,000 in 2024
– BTC top > $300,000 in 2025 pic.twitter.com/lCZjnuoYMO— PlanB (@US$100 trillion) April 17, 2024
Ramani Ramachandran, CEO of Router Protocol, predicts significant institutional demand during this halving, potentially surpassing previous retail demand. The convergence of these two forces promises to be an interesting spectacle to behold.
Others, like Kadan Stadelmann, CTO of Komodo Platform, take a more nuanced approach. Stadelmann acknowledges historical trends and highlights the increasing involvement of institutional investors as a potential factor influencing future price growth.
First signs of a sharp rise in prices?
The market seems to whisper its own predictions. In the 24 hours leading up to the halving, the price of Bitcoin had already risen by nearly 5%. This could be a backlash from investors anticipating future scarcity, or a sign of renewed confidence in the world's leading cryptocurrency.
Meanwhile, a recent survey of institutional investors and wealth managers revealed that 69% expect an increase in investment in Bitcoin due to the halving, while only 2% predict a decrease in investment.
Bitcoin's halving is a significant event in the cryptocurrency's history, and its long-term impact will be debated for months, if not years.
Featured image from Pexels, chart from TradingView
