Beyond Bitcoin Halving: What’s Next?

This article is brought to you by FBS.

Bitcoin halving is a fundamental mechanism encoded in its backbone, and a critical event in the cryptocurrency market, attracting traders, investors and digital currency enthusiasts worldwide. This phenomenon occurs approximately every four years and is characterized by almost 50 percent cuts in mining rewards, reduced supply of new bitcoins and intense speculation about the asset’s future value. These trends could theoretically lead to the increase in value of the asset as a countermeasure against inflation – similar to the dynamics of precious mineral mining.

Market experts from FBS draw traders’ attention to the intricacies of bitcoin halving, as this event is essential for those who want to deftly navigate the inherent volatility of the cryptocurrency market around the event and develop sophisticated investment strategies. In this article, FBS analysts examine the halving effect and its impact on Bitcoin valuation.

Historical price changes and investment returns

Historically, Bitcoin halving events, which occur approximately every four years, have become essential milestones in cryptocurrency price movements and overall market dynamics. These events, characterized by the halving of miners’ compensation per block, have been closely associated with significant price fluctuations and have generated significant interest among investors and traders.

Bitcoin’s first halving in 2012, when the rewards dropped from 50 to 25 BTC per block, paved the way for an unprecedented price increase. An initial investment of $100 during the first halving would grow to over $1.6 million by September 2023, indicating Bitcoin’s enormous growth potential powered by its deflationary mechanism. The second halving in 2016 further cemented this trend, reducing the reward to 12.5 BTC and preceding another significant rise that peaked in 2017, highlighting the cyclical nature of Bitcoin’s price movement in response to halving events.

FBS analysts are paying particular attention to Bitcoin’s 2020 halving which represents a more challenging scenario. This occurred during significant global uncertainty caused by the COVID-19 pandemic. Despite the initial volatility, the Bitcoin price eventually embarked on an explosive growth trajectory, highlighting the asset’s resilience and value as a hedge against inflation and economic instability. After the 2020 halving, bitcoin hit new all-time highs, highlighting the impact of this event on broader market dynamics.

Source: CoinDesk.com, What is a Bitcoin Halving?

The crucial correlation between halving events and Bitcoin’s price should not be underestimated, FBS financial market analysts underline. These events tend to generate increased market attention and speculative interest driven by the expectation of reduced supply, and potential price increases. The anticipation and impact of halving events often led to price increases – the post-halving periods in 2012, 2016 and 2020 serve as the prime examples.

The relationship between supply dynamics and price is fundamental to Bitcoin’s economic model. Halving events reduce the rate at which new BTC is created, thereby limiting the supply. Since Bitcoin’s supply is limited to 21 million coins, these events contribute to a shortage of the cryptocurrency, which, combined with increasing demand, has historically led to higher prices.

As the next halving on April 24, 2024 approaches, the cryptocurrency community is eagerly anticipating its potential impact on the bitcoin price and cryptocurrency market dynamics. Historical examples show that halving events can lead to significant price increases in the months and years following the event. However, the unique economic circumstances, regulatory changes and technological advances associated with each halving event mean that the outcome of each event may be different.

Why is the 2024 halving different from others?

FBS analysts underline the unique features of the 2024 Bitcoin halving. This year is more than just another cyclical event in cryptocurrency history; it is a turning point that heralds a new era in Bitcoin’s evolution, marked by profound changes in market dynamics.

For the first time, halving is preceded by a bitcoin rally, which differs from previously seen patterns where significant price increases have occurred in the post-halving months.

What makes the 2024 Bitcoin halving trend unique is the dramatic increase in the number of institutional investors, as evidenced by the overwhelming success of spot bitcoin ETFs in the US. These ETFs, which attracted an impressive $1.5 billion in the first 15 trading days, symbolize a significant milestone in the adoption of mainstream financial instruments, and provide a stable buffer against post-halving market volatility.

The response of the mining sector to the impending halving of rewards further illustrates sophisticated and proactive strategies. By raising significant funds, such as Core Scientific’s $55 million equity offering and Marathon Digital’s $750 million hybrid equity raise, miners are bolstering their operations against expected reductions in blockchain rewards.

FBS analysts cite another unprecedented aspect of the 2024 halving – the explosion of on-chain activity on Bitcoin, driven in part by the introduction of sequence inscriptions. This innovation created more than 59 million NFT-like collectibles, generated more than $200 million in transaction fees, and greatly enriched the Bitcoin ecosystem. The surge of network activity and the additional utility introduced by ordinal inscriptions indicate a notable evolution from the previously static nature of the network observed during the halving period.

The network’s hash rate, which has doubled within a year from 255 exahashes per second (EH/s) to an astonishing 516 EH/s, is testament to the increasing energy and resources devoted to mining Bitcoin. This unprecedented computing power affects not only the network’s security, but also its resilience and ability to adapt to the declining block rewards.

Further distinguishing this halving are developments such as the introduction of Runes and the potential for the “Mother of all reorgs” due to the expected high value of the halving block. The interest in Runes, following the success of Ordinals, and the speculation surrounding intense competition among miners for the valuable halving block, underlines the innovative spirit and competitive dynamics within the Bitcoin community.

Bitcoin Price Horizon in 2024

FBS financial market analysts foresee the rapidly approaching Bitcoin halving, along with the rest of the cryptocurrency community. However, opinions on this subject differ greatly. This period is marked by significant interest from various quarters, including analysts, ETF proponents, and institutional investors, all of which indicate that this could be a transformational era for Bitcoin.

The range of price predictions for 2024 and beyond is as wide as it is interesting.

CoinCodex tempered expectations with a more conservative but optimistic forecast of a rally that will take Bitcoin to around $179,000 by August 2025 after a slight post-halving correction;

Figures like Michael Novogratz and Fred Thiel support this optimism, saying that after a minor correction, we could quickly see a price in the range of $125,000 to $150,000.

The discussion goes beyond these numbers: a host of other predictions paint a dynamic and diverse picture of Bitcoin’s potential future value:

Standard Chartered and Adam Back expect Bitcoin to reach $120,000 and $100,000 respectively by the end of 2024;

Berenberg offers a more cautious forecast of $56,630 by April 2024, while Fundstrat suggests a potential jump to $180,000 just after the halving;

Forecasts from Onramp Capital’s Jesse Myers, Google’s Bard, and Cointelegraph reports suggest swings between $100,000 and $130,000, suggesting a post-halving rally;

Not to be left out, figures like Anthony Scaramucci and Michael Saylor discuss reaching or exceeding the $100,000 mark, with Saylor pointing to providing shock as the primary catalyst;

Katie Wood of Ark Invest envisions a future in which Bitcoin’s value could rise to $1.5 million by 2030, with a base case of $600,000, which paints an extremely optimistic picture;

However, JPMorgan predicts a drop in Bitcoin’s price to $42,000 after the halving event, as production costs set a historic price bottom, challenging profitability for miners but benefiting larger publicly listed companies in a market shake-up.

BTCUSD, weekly timeframe

Source: FBS.

Despite differing opinions, many have rightly noted – the bull run is now a Bull Run. Therefore, despite the different predictions, FBS’s outlook is also bullish.

On the weekly chart, BTCUSD, which reached an all-time high, corrected it and can expect further movement. FBS financial market analysts suggest that in the event of a break above the resistance level of 74,000, the target could be the $90,000 level corresponding to 138.2 Fibonacci.

Institutional demand, the historic impact of halving events and general sentiment toward Bitcoin favor a bullish outlook, FBS analysts conclude. Nevertheless, investors and enthusiasts should prepare for potential volatility and take a long-term perspective when evaluating Bitcoin’s prospects.

Key takeaways from FBS

Finally, FBS financial market experts see the 2024 halving as a watershed moment that can change the cryptocurrency space and fundamentally affect the rest of the markets. Against the backdrop of growing institutional interest and technological advancements, this halving is expected to significantly reduce the supply of Bitcoin, potentially triggering a bullish market reaction. However, one should never forget that the cryptocurrency world is more often than not unpredictable.

In this atmosphere of optimism mixed with uncertainty, one must be guided by a clear strategy and be prepared for any scenario.

About FBS

FBS is a licensed global broker with over 15 years of experience and over 90 international awards. FBS is steadily developing as one of the market’s most trusted brokers, with its traders numbering more than 27,000,000 and its partners numbering more than 700,000 around the world. The annual trading volume of FBS clients is more than $8.9 trillion. FBS is also the official partner of Leicester City Football Club.

CoinGecko

CoinGecko’s editorial team consists of writers, editors, research analysts and experts in the cryptocurrency industry. We regularly produce and update our articles to provide the most complete, accurate and useful information on all things cryptocurrency. Follow the author on Twitter @coingecko