All eyes are on the upcoming Bitcoin halving, which is expected on April 19. After halvings, the flagship crypto's price tends to rise exponentially - history has shown as much.
Bitcoin added over 20% to its value this year. It is currently changing hands for just under $52,000, according to CoinGecko data. It gained 150% last year, but it's still down from its all-time high of $68,990 in late 2021.
Will the next Bitcoin halving lead to a new all-time high by the end of 2024? There are bullish and bearish predictions, but one thing is for sure – Bitcoin will not stay flat.
The Bitcoin blockchain has a mechanism to control the asset supply, which is capped at 21 million BTC. When a Bitcoin halving occurs, the mining reward is cut in half, which means miners get 50% fewer BTC for each transaction they verify.
Halvings take place roughly once every four years or after mining a set of 210,000 blocks. The mining reward will be cut from 6.25 to 3.125 BTC in the next Bitcoin halving.
Bitcoin has rallied after each halving
There have been three halvings in the history of Bitcoin, and the biggest crypto by market cap has always rallied thereafter. The first Bitcoin halving was in November 2012, when Bitcoin was worth just $12. A year later, it had almost reached $1,000.
The second Bitcoin halving took place in July 2016. Bitcoin was trading for around $640 at the time. It had added 40% to its value within six months, and a year later, it recorded a monumental price increase of 296%. At the end of 2017, Bitcoin was worth almost $20,000.
The third halving was in May 2020. Bitcoin was trading at $8,750 before the halving. It gained 80% in the next six months and 548% within a year of the event. It reached its all-time high in November 2021.
What do Bitcoin bulls say?
Bitcoin lost 75% of its value in 2022 but gradually regained it. On February 12 this year, it shot past $50,000 again. The biggest crypto is up over 20% in the past month and more than 130% over the past year. This has led many bulls to predict it will surge past $60,000 after Bitcoin halving, but before the summer.
There is sustainably high demand for the asset
What's behind their prediction? They have considered the potential demand after the Bitcoin halving. There are many reasons to believe retail and institutional investors will have an incentive to buy and hold Bitcoin. The Bitcoin halving isn't the only factor.
11 Bitcoin spot ETFs were recently approved and opened for trading. ETFs overcome the challenges of Bitcoin self-custody or buying Bitcoin on an exchange. These funds let people buy Bitcoin just like they would buy stocks, doing away with the complications. CoinShares data indicates the weekly inflows into these ETFs exceed $1 billion.
The influential bulls
MicroStrategy has traditionally been bullish on Bitcoin. As of February 5, the tech corporation held over 190,000 Bitcoins. Interest from other institutional investors is rising. Recently, Blackrock CEO Larry Fink called Bitcoin "digital gold." Previously, he opposed the idea of holding and trading the asset.
Several financially stable cryptocurrency companies are also holding the world's flagship crypto. Their stability makes them likely to keep holding it after Bitcoin halving rather than turning to it as a source of liquidity. One such company is Bitcoin miner Marathon Digital, which holds 16,000 bitcoins and more than $300 million in cash.
Reportedly, there are more than 66,000 Bitcoins in the stablecoin Tether's ecosystem. Tether generates interest on its cash reserves. Its income from interest also allows it to invest in Bitcoin.
Currently, investors are putting billions into Bitcoin, so we can say the demand is sustainably high. It will remain so due to balanced crypto operations, Bitcoin ETFs, the upcoming Bitcoin halving, and institutional adoption.
June 20 is the first day of summer, more than two months after the Bitcoin halving is due to take place. Considering past price growth after Bitcoin halving, it seems reasonable to expect Bitcoin to rise from $52,000 to $60,000 by then.
Factors beyond the Bitcoin halving
2023 was a good year for Bitcoin overall, but not necessarily for the crypto industry in general. One highly adverse event was government agencies' civil enforcement action against Binance and Changpeng "CZ" Zhao, its founder and CEO.
Eventually, Binance reached settlements with the agencies, as part of which CZ agreed to resign as CEO. The positive news was that misuse of customer funds was not among the allegations toward the exchange, and Binance did not see a bank run. The settlements were a huge green flag for market movements this year, according to experts.
Bitcoin and interest rates
There is reason to believe the US Federal Reserve has reached the peak of its rate hikes, which will help Bitcoin this year. Stable or falling interest rates make investors perceive Bitcoin and other cryptocurrencies as a hedge against increasing scarcity, especially with the upcoming Bitcoin halving.
Experts predict three rate cuts by 25 basis points this year, which is more aggressive than thought earlier. They recommend keeping an eye on inflation based on the PCE price index. If prices start creeping up again, interest rates may rise further.
When will Bitcoin investors start selling?
Bitcoin's potential to reach another all-time high this year depends on investors' willingness to sell after the Bitcoin halving. Will they have an incentive to do so? The price will start dropping if they do. At the beginning of February, most Bitcoin holders had recorded a profit, according to data from AltIndex. The percentage is currently over 90%, the highest it's been since the last all-time high in late 2021.
This means anyone who sells Bitcoin now will make money. Bitcoin will not reach $60,000 if selling pressure equals or surpasses buyer demand.
Another strong year
Investors can be expected to hold out for even higher profits, which is a bullish argument for Bitcoin as well. In every event, the overwhelming conviction is for another strong year after the Bitcoin halving. That isn't to say any Bitcoin investment should be taken lightly. Bitcoin has been hit by volatile trader sentiment and bad actors in past years. There is no guarantee for anything.
What do the bears have to say?
For the bears, uncertainty looms ahead despite the optimistic market conditions surrounding Bitcoin halving. Crypto trading expert Gareth Soloway said in a YouTube interview with David Lin that Bitcoin could lose value, indicating a connection with the stock market. If the stock market experiences a 20-30% correction, Bitcoin could retest $30,000 levels.
According to Soloway, this could be an opportunity to accumulate Bitcoin before or after Bitcoin halving. The view aligns with the broader perception that Bitcoin behaves as a high-risk asset, which means it might see mass selloffs during market decline.
Soloway drew parallels between Bitcoin's behavior when it peaked at almost $70,000 around a year and a half after the Bitcoin halving and the current sentiment on social media. He made an analogy with stock market bubbles, where speculation engenders the assumption that any investment will be profitable.
The expert does not believe Bitcoin can reclaim its record high in the wake of the Bitcoin halving without undergoing a correction. However, he acknowledged that there are reasons to be bullish on Bitcoin in the long term.
He does not think Bitcoin's impressive recent rally is only driven by the Bitcoin halving and the approval of Bitcoin ETFs. Broader market dynamics are at play, in his opinion. He draws attention to the role of cash and risk assets in propelling the flagship crypto's recent gains.
Political sentiment against Bitcoin
Governments the world over are demonstrating a swing in sentiment against Bitcoin and cryptocurrency in general, which could lead to a price decline irrespective of Bitcoin halving. The US, in particular, is becoming more hostile towards cryptocurrency. Recently, lawmakers introduced a bill to expand the scope of the Bank Secrecy Act and impose stricter reporting requirements on digital asset transactions.
This is a worrying development that could prove crippling to the US crypto market. The implications of Know Your Customer (KYC) and anti-money laundering (AML) laws also concern investors. Enforcing strict requirements on private wallet transactions can be challenging and unpleasant for all parties involved. According to experts, compliance can be very hard to achieve, and AML laws, in particular, remain a highly contended issue.
Governments could move to restrict Bitcoin if it saw mainstream adoption after Bitcoin halving because this would threaten their monopoly on money.
Final thoughts
There is reason to believe Bitcoin will continue its bull run, but a new all-time high in the near term is doubtful. A correction is expected after the Bitcoin halving, and if there is a new ATH, it won't be until 2025. When all 21 million Bitcoins have been mined, rewards for adding blocks of verified transactions will be in transaction fees instead of freshly minted Bitcoin. Bitcoin mining will have reached its limit by 2140, and there will be no more Bitcoin halving.
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