A Bitcoin halving event is expected to happen sometime in April 2024. This will be the fourth time the latest cryptocurrency cut its block reward in half. Historically, halving events have resulted in Bitcoin hitting new all-time highs and bull runs for the entire crypto market. But what are the effects of Bitcoin halving on Ether (ETH) and other altcoins?
In this article, we will take a deep dive into the highly anticipated Bitcoin halving event and how it can affect the crypto market and the altcoins. I will discuss how things played out in the past and how this time is different or not different from those. Let’s jump in without any ado.
What Is Bitcoin Halving?
The supply of Bitcoin is controlled by what is called bitcoin mining an emulation of the mining of gold, which also guarantees the integrity of the network. Miners solve complex mathematical equations and verify transactions happening on the Bitcoin network.
The miners are compensated with the block rewards in Bitcoin. When Bitcoin was launched in 2008, the block reward was set at 50 Bitcoins and the protocol is set to cut the block reward by half after the creation of every 210,000 blocks. This is to regulate the supply of Bitcoin and improve its value over time.
How Does Halving Affect Bitcoin?
Before we talk about how the Bitcoin halving event will affect Attcoins, it is necessary to understand how the event affects Bitcoin. As mentioned above, the block reward will be reduced in half, from 6.25 BTC to 3.125 BTC.
This will have a significant impact on the economics of Bitcoin mining. The miners will now be forced to use more efficient technology to maintain the profitability of mining. A reduction in new supply if met with an increase in demand will result in an increase in Bitcoin’s value, as has been the case in the last three halving events.
Bitcoin is not only the largest cryptocurrency but also makes up more than half of the value of crypto markets. Any changes in value will affect and have affected the mood of the crypto market and the prices of other cryptocurrencies. Let’s see how Bitcoin halving events have played in the past.
How Does Halving Affect ETH)?
Launched in 2015, ETH did not exist during Bitcoin’s 2012 halving event. In the first six months following the second halving event of Bitcoin in 2016, ETH prices fell by around 50% moving from around $14 to $6 though BTC price was on the rise during this period.
Both BTC and ETH later peaked hitting $19,000 and $1,400 about 12 more months after the event. During Bitcoin’s third halving event in 2020, both BTC and ETH moved up together hitting their respective highs about 12 months after the event. Throughout these years, it has been observed that other Altcoins follow a similar pattern.
Other Factors That Affect Altcoin Prices
While talking about the impact of the halving events on the price of Bitcoin and other cryptocurrencies, it is crucial to consider other contributing factors in consideration. In the time around the halving event is supported by macroeconomic tailwinds.
The interest rates in the United States are expected to continue to be high and the wars in the Middle East and Eastern Europe are expected to continue for a while longer.
This will generate a demand for Bitcoin and Altcoins as a hedge against inflation and geopolitical events. Following the Bitcoin ETFs, the approval of spot ETH ETFs in the US will fuel the demand for ETH in 2024. The evolution of the crypto regulatory landscape will be another key factor that will impact the popularity of cryptocurrencies.
Conclusion
All things considered, it is important to note that we cannot depend on historical data alone to forecast the performance of ETH and other altcoins in 2024.
Though the Bitcoin halving event will play a key role in the crypto market performance this year, other factors will decide how pronounced the impacts of the event could be. If Bitcoin hits the $100,000 mark as predicted by the experts, it will cross the $2 trillion mark in market capitalization and can be considered a replacement for to several weak sovereign currencies.
