Key Takeaways:
Bitcoin (BTC), the world’s largest cryptocurrency by market capitalization, underwent its highly-anticipated block reward ‘halving’ process late on Friday, April 19th.
Following the quadrennial event, which occurs after every 210,000 blocks are mined on the blockchain, BTC showcased a relatively stable performance in the market, with prices remaining stable between the $63,000 to $64,000 range.
Bitcoin Finds Stability Post-Halving As The Blockchain Is Being Better Utilized Than Before
The halving also reduced the number of Bitcoins awarded to miners for creating new blocks from 6.25 BTC to 3.125 BTC per block mined. Historically, the event is known for triggering a bull cycle, but this time the broader crypto market was relatively stable.
Parth Chaturvedi, investment lead at CoinSwitch Ventures, said on Friday that layer-2 solutions on Bitcoin are ensuring the network is “better utilized” by bringing border adoption. He also noted that BTC could be propelled to new-found heights if its annual inflation rate remains below that of gold “for the first time”.
He emphasized that such a scenario holds “transformative potential” for the apex cryptocurrency, especially among the younger generation, who may increasingly view it as a modern-day store of value akin to how prior generations considered gold.
“This shift in perception could fundamentally reshape investment attitudes and strategies for years to come”, added Parth.
Manhar Garegrat, head of global partnerships at digital asset management firm Liminal Custody Solutions, said the Bitcoin halving may not be “immediately discernible” as there are several second-order effects to consider.
He noted that halvings typically trigger heightened market volatility and increased trading activity that could lead to price fluctuations and shifts in investor sentiment for the digital asset.
Due to its supply-demand dynamics, there would be an upward price pressure for BTC, caused by new investors rushing to the market to get a piece of the cake.
How Halving Dictated Bitcoin Prices In The Past?
Garegrat said it is worth considering the possibility of new crypto-based financial products, similar to the newly launched spot Bitcoin exchange-traded funds (ETFs), entering the market. These investment vehicles would offer mainstream investors with alternative avenues for exposure to crypto assets.
Historically, halving follows distinct market phases: a pre-halving rally driven by speculation, followed by a post-halving reaccumulation phase, which leads to Bitcoin surging to new all-time highs.
We already witnessed a parabolic rally prior to the halving when BTC hit an all-time high of close to $74,000 last month. Experts say it was an optimistic move given that usually the ATH is reached 6-12 weeks after the event.
During the first halving in 2012, the price of Bitcoin skyrocketed from $13 a piece to a peak of $1,152 the following year. Similarly, during the second halving in 2016, BTC witnessed a surge from $664 to $17,760 in the subsequent year.
The most recent halving, which took place in May 2020, saw Bitcoin prices surge from $9,734 per token to a staggering $67,549 in 2021.
Macroeconomic Events Negatively Impact Bitcoin Prices But Create A Good Investment Opportunity
However, macroeconomic events happening around the world could lead to BTC prices tanking, but it also offers a wonderful opportunity for long-term investors to accumulate.
Bitcoin remains a more accessible investment avenue than gold, real estate, and equity but unlike past halvings, we might not see a sharp surge in price happening any time soon.
After a disastrous 2022 that saw prices plunge to a record low of $15,000, Bitcoin showcased a remarkable recovery drive, largely propelled by the excitement surrounding the US Securities and Exchange Commission’s (SEC) approval of spot Bitcoin ETFs in January.
This, added to expectations of a reduction in interest rates by the Federal Reserve provided additional support for the Bitcoin and cryptocurrency markets.
Earlier last week, analysts at JPMorgan said they don’t expect any price increases for Bitcoin as the halving had already been priced in. They attributed their stance to the leading cryptocurrency being in an “overbought” position and subdued venture capital funding across the crypto industry this year.
Andrew O’Neil, a crypto analyst at S&P Global, expressed skepticism regarding how the halving could impact Bitcoin’s price trajectory.
He noted multiple factors such as macroeconomic events and the Federal Reserve’s moves to tackle rising inflation in the US influencing market dynamics and not just the halving alone like in the past.
Bitcoin has struggled to maintain its positive momentum following the rally to an ATH in March. However, since the halving, the leading cryptocurrency has managed to post some gains.
At the time of writing, Bitcoin (BTC) is trading at $66,273 – up 1.7% in the last 24 hours.
Also, Read: Bitcoin Hits ATH Above $73,000 As Demand For Spot Bitcoin ETFs On The Rise
