The cryptocurrency market has been on a steady upward trajectory since its recovery from the bear market of 2022. As we delve deeper into 2024, Bitcoin has been particularly impressive, crossing the $50,000 mark in February. This surge has been attributed to a combination of factors, including the anticipation of the upcoming Bitcoin halving event.
Bitcoin’s value has tripled since January 2023, with the recent gains largely due to two significant events expected in 2024. The first of these was the approval of 11 spot Bitcoin ETFs by the U.S. Securities and Exchange Commission in January, which led to billions of dollars in inflows. Following this, Bitcoin’s value soared past $50,000, a level not seen since 2021 when it reached its all-time high of $68,789.
The next anticipated event, scheduled for April 2024, is the Bitcoin halving, which will reduce the production of new Bitcoin. This could potentially drive the asset’s price even higher.
Bitcoin halving is a recurring event, happening approximately every four years since the cryptocurrency’s inception in 2009. While it doesn’t directly affect Bitcoin holders, it involves behind-the-scenes activities that could potentially enhance the asset’s future value.
In essence, halving is related to Bitcoin mining, the process by which transactions are verified on the blockchain and new Bitcoins are introduced into circulation. The total number of Bitcoins that can be mined is capped at 21 million. Currently, with 19.6 million in circulation, only 1.4 million remain to be mined. During a halving event, the Bitcoin protocol reduces by half the number of coins awarded to successful miners.
The implication of this is that after each halving, the computing power needed to create new Bitcoin doubles. Theoretically, this sharp decrease in production could cause the asset’s value to appreciate, assuming that demand for the asset remains constant or increases.
One unique aspect of Bitcoin halving is its unpredictability. Although it occurs roughly every four years, there’s no specific date set for the next halving. It happens after 210,000 blocks on the Bitcoin blockchain have been filled with data. While it takes about four years to complete this much mining, the exact day it will occur can’t be accurately predicted until the event is near. Experts, however, estimate that the next halving will take place in mid-to-late April 2024, about two months from now.
With the Bitcoin halving event looming, is it the right time to invest in Bitcoin? Historical data shows that the asset’s value has appreciated significantly in the months following each of the three past halvings. For instance, the last halving in May 2020 saw the cryptocurrency add $2,000 to its value in the subsequent three months. However, Bitcoin’s price fluctuations can be complex and unpredictable.
Experts remain largely optimistic about the future of cryptocurrency, particularly in light of the Bitcoin spot ETFs and the upcoming halving. Martin Leinweber, a digital asset product strategist at MarketVector Indexes, notes that the demand for Bitcoin products is extremely high.
“Investors had previously stated that achieving $5–$10 billion USD [in net inflows to Bitcoin ETFs] in the first three months would be an unprecedented success,” he says. “Now, BlackRock [alone] is on the verge of surpassing $5 billion in assets under management within 23 trading days, placing it in the top 7% of all ETFs by size.”
Leinweber uses this to illustrate that the demand for Bitcoin already significantly exceeds the available supply. He adds, “A broader range of investors are dedicating a portion of their assets to Bitcoin. Large portfolio managers are now incorporating this new asset class into their allocations.”
However, while there are expectations for price increases around the halving, investors should not anticipate a guaranteed surge. Dan Weiskopf, a portfolio manager at ETF company Amplify, warns of potential volatility. He advises investors to be patient and not to expect a constant upward trend. “[Do] not expect every day to be a straight line, up 3%-5%,” he says.
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