Every four years, the crypto world gears up for what has historically been a very exciting time in the industry: the Bitcoin (BTC) halving. With the next halving set to take place next week, we reached out to the fintech industry to find out what impact the event would have on the crypto industry as well as the larger fintech landscape.
For those outside the crypto world, the Bitcoin halving may seem like a strange idea: why half how fast you can get something when it’s in such demand? This is a concept written into the cryptocurrency’s algorithm to counter inflation.
When Bitcoin was initially launched in 2009, every time a miner added a new block to the blockchain, they were rewarded with 50 BTC. However, this high reward was unsustainable going forward. Especially since it has a cap of 21 million, and the more people who want to mine it, the sooner it will reach this cap.
As a result, when approximately 210,000 blocks were added, Bitcoin underwent its first halving in November 2012. The reward for each block dropped to 25 BTC. Four years later in July 2016, the same event occurred, halving the reward once more to 12.5 BTC. Miners now get 6.25 BTC per successful addition to the blockchain after the May 2020 halving.
Currently, each successful reward is worth around £338,162, but if miners continued to get 50 BTC per addition, they would receive over £1,000,000.
The halving happening next week will likely see each addition to the blockchain receiving 3,125 BTC going forward.
Price increase is on the way
In 2016 and 2020, the halving caused huge price increases with the crypto’s value increasing by 194 per cent (£170-£500) and 100 per cent (£4,000 to £8,000) respectively.
Based on past events, next week’s Bitcoin halving will likely send the price of the crypto soaring. Commenting on this, John Roy, managing director of technology at Water Tower Research, the investor relations platform, said: With Bitcoin holding above $70,000 and an upcoming halving event poised to slow Bitcoin’s growth, ETFs from major financial companies such as iShares , Fidelity, Franklin, and ARK saw significant interest.
“This interest is heightened by the declining supply of bitcoins, which are moving closer to the limit of 21 million worldwide, with about 19 million currently in circulation. While previous halving events have not directly caused a price spike, the halving process is attracting significant attention as an impending event, highlighting the scarcity of Bitcoin. This expected scarcity, combined with the approaching 21 million limit, indicates a potential for an upward price movement.
“As Bitcoin continues to captivate investors, companies involved in Bitcoin processing and related technologies are expected to gain more attention.”
A strong year for Bitcoin
In January 2024, the Securities and Exchange Commission approved the listing and trading of a number of spot Bitcoin exchange-traded product (ETP) shares. This meant that American investors, both institutional and retail, now had a clear way to track the movements of the crypto and could make purchases without setting up an account or digital wallet with an unregulated exchange. This positive move for the industry started the current bull market.
Commenting on this, Alyse Killeen, founder and managing partner of Bitcoin-focused enterprise Stillmark said: “Previous halvings have indeed had a short-term effect on the price of BTC, but these increases are rarely if ever sustained. If you look at what has really moved the market this year, it is the arrival of the BTC Spot ETF, which single-handedly outbid BTC brought a long period of stagnation.
“This is another lesson every investor should know: ultimately, what moves any asset market in the long term is its utility. Spot ETFs are a very specific example of a new utility, but there are many more that are already in operation, or about to arrive. These range from secure blockchain-based messaging platforms, to smart contracts, to use cases of harnessing wasted energy from the oil and gas industry to mine Bitcoin. When applications are relevant to ordinary people, they are even more powerful in terms of adoption, usage and therefore long-term increase in bitcoin’s value.”
Since then, the crypto market has flourished. In March, Bitcoin and many other cryptocurrencies surpassed their previous highs, with BTC reaching $74,000.
A strong year for crypto
Other notable achievements in March alone were highlighted by KuCoin. The Ethereum network has seen significant progress with the implementation of the Dencun upgrade, resulting in a 13.66 percent increase in the Total Value Locked (TVL) within its Layer2 solutions, as measured in ETH.
This development, along with a marked upswing in crypto investment and financing – highlighted by 180 projects raising a combined financing of $1.16billion—highlighted a strong revival in the primary investment market.
What’s next?
With so many things seemingly going in the right direction for cryptocurrencies, we asked the industry whether the Bitcoin halving will inspire investor confidence and whether or not it will result in long-term success for the crypto.
Strategy is needed
Ben Cousens, Chief Strategy Officer at ZBD, the Bitcoin software and infrastructure development company, noted that having a Bitcoin strategy in place is extremely important for a fintech firm in the modern era. He added that the halving will serve as a good way to educate people on Bitcoin, and it will bring more attention to the crypto.
“I would say the halving intrigues rather than investors. This is a supply constraint that puts upward pressure on the fiat price. It is an inherent part of the technology; typically, each halving serves to educate people about how Bitcoin works.
“Fintech companies without a Bitcoin strategy will fall behind. Bitcoin adoption is growing exponentially and has been since its creation. It will not stop until it replaces our financial foundation.”
Short term and long term gains
Kate Leaman, chief market analyst at AvaTrade, the trading platform, explains how this halving came at the perfect time to not only capitalize on a strong bull market, but also strengthen Bitcoin for the long term.
“As for the mood around this halving, it’s leaning more towards the bullish side. This means that people are generally optimistic and expect the price of Bitcoin to rise. Investors are relatively hopeful – following the pattern of previous halvings where prices have risen – to see a similar rise this time around.
“Looking at the long-term effects, the halving is seen as a positive step for Bitcoin’s future. It’s like making a rare collectible even rarer, which can increase its value over time. This scarcity, combined with growing interest in Bitcoin as a digital asset, could strengthen its position in the market and potentially increase its price in the long term.”
The halving is now less manic
To Tom Higgins, CEO, Gold–i, the trading technology platform, halving is no longer expected as it once was.
“Bitcoin has grown in attacks and has crashed a number of times due to believers being scammed (FTX, etc.), and pandemics and wars. What has changed things for good in this bull market is the institutional money that has entered the Bitcoin flowed into the ETF market despite, not because of, the SEC.
“Halving used to be the ‘big news’ in the land of Bitcoin, but now so many other world events make more of a difference, that halving is less manic.
“Halving will not destroy confidence as it is planned and known, but it will not increase the price massively as it is already priced in. Some technical aspects will support price growth as there will be less Bitcoin produced after the halving, but this is not new news.
“With huge amounts of institutional money in the Bitcoin system, this is not a short-term hype. It’s here to stay, so you better get used to it!”
Francis Bignell
Disclaimer for Uncirculars, with a Touch of Personality:
While we love diving into the exciting world of crypto here at Uncirculars, remember that this post, and all our content, is purely for your information and exploration. Think of it as your crypto compass, pointing you in the right direction to do your own research and make informed decisions.
No legal, tax, investment, or financial advice should be inferred from these pixels. We’re not fortune tellers or stockbrokers, just passionate crypto enthusiasts sharing our knowledge.
And just like that rollercoaster ride in your favorite DeFi protocol, past performance isn’t a guarantee of future thrills. The value of crypto assets can be as unpredictable as a moon landing, so buckle up and do your due diligence before taking the plunge.
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