Bitcoin halving is expected around April 20, but a number of unique factors are likely to set the flagship crypto's fourth such event apart from previous ones. Everyone wants to know the Bitcoin price after halving, so here are the only five factors to consider in this context.
1. Increased scarcity will impact the Bitcoin price after halving
The upcoming Bitcoin halving will not only reduce miners' Bitcoin rewards but also lead to fewer Bitcoins being created, which could help mining companies' shares and increase the Bitcoin price after halving. This is simply because there will be fewer Bitcoins left to trade, which has been the case since early 2020.
Illiquid supply is typically attributed to forgotten keys and lost wallets, but the Bitcoin supply available has been declining over the last four years, which makes this halving cycle different. That's not necessarily a bearish implication for the Bitcoin price after halving, because that could mean investors will be less inclined to sell, and there will be less short-term price volatility.
The supply is capped at 21 million Bitcoins, and more than 19 million are in circulation. This is making mining harder. Miners typically sell Bitcoin before halvings to cover operational costs, but this effect is probably priced into miner stock valuations because the impact has been known for a while now.
Miners will consolidate
According to insiders, the best-performing publicly traded Bitcoin mining companies will be the more established ones, such as Riot Platforms, Marathon Digital Holdings Inc., Cipher Mining Inc., and CleanSpark Inc.
Most public miners could lose money when they sell unless the Bitcoin price after halving increases to make up for falling miner profits. The losses will stem from general and administrative expenses exceeding profitability. A prolonged bear market after the halving could reduce these miners to a fraction of their market caps at present.
Bitcoin miners are accumulating, not selling holdings, as they expect a bullish market for the Bitcoin price after halving. There have been fewer sales for companies with reserves of up to 1.8 million Bitcoin. However, this expectation of a higher Bitcoin price after halving is not unambiguous.
Selling pressure
According to Arthur Hayes, BitMEX cofounder and CIO of Maelstrom, miners will probably face selling pressure immediately before and after the halving. He believes the Bitcoin price after halving will be lower, which goes for crypto prices in general. The halving will add fuel to liquidation, culminating in a selling frenzy considering that it will happen at a time of relatively tight dollar liquidity. Some experts have gone so far as to say it's best to abstain from trading until at least May.
Another factor in the Bitcoin price after halving is the production cost of Bitcoin, which could deplete miner profitability unless there is a price increase. Mining companies with higher production costs might reduce operations or shut down, decelerating Bitcoin production.
2. Renewable energy and operational efficiency
It follows from the above that publicly listed mining companies that use more efficient equipment and operate with lower energy costs will navigate the halving more smoothly. Their market share might increase as they continue making a profit thanks to their efficient operations and possibly lower electric power costs.
In other words, survival of the fittest will impact the Bitcoin price after halving, and only the most efficient companies will make it in the new economic conditions, driving the price up. Bitcoin's new all-time high put the vast energy used by mining computers back in the spotlight. The Bitcoin mining industry is seeing a pushback from environmentalists, which also comes amid increased interest from investors in companies that meet ESG criteria.
A renewed focus on green energy
In light of the expected Bitcoin price after halving, the industry is responding with a renewed focus on renewable energy sources. Recent tendencies in Bitcoin mining include a strong interest in sustainable mining practices, with some companies exploring green energy to assuage environmental risk.
You could mine Bitcoin on a computer at home when it launched in 2009. With time, the math problems got more complicated. To stay competitive, miners had to get more powerful computers. The most prolific miners used specialized computer stacks, which affected the Bitcoin price after halving.
In sum, mining companies that use renewable energy sources are in a better position than those that don't, which will definitely impact the Bitcoin price after halving in an upward direction. They have the advantage of lower operating costs and address ESG concerns among investors and the general public, which could become more significant against the backdrop of intensifying regulatory pressures.
3. Spot ETFs will change Bitcoin price after halving
Spot bitcoin exchange-traded funds (ETFs), which did not exist at the time of previous halvings, have transformed Bitcoin's market dynamics. How will they affect the Bitcoin price after halving? These products launched in January. They started seeing massive inflows right from the start, turbocharging demand and the price of Bitcoin. On average, inflows into Bitcoin ETFs are six times the new Bitcoin units generated daily.
Coinbase predicted the "equilibrium" Bitcoin price after halving would be around $74,000, up from around $69,000 at the time of writing. This is based on the assumption that the pace of new inflows into spot Bitcoin ETFs drops from $6 billion in February 2024, when the prediction was made, to $1 billion of net inflows monthly. This would be the Bitcoin price after halving measured against roughly 13,500 Bitcoin mined per month.
4. The impact of Ordinals and BRC-20 on Bitcoin price after halving
The Bitcoin network incorporates technologies such as BRC-20 and Ordinals, both of which mark significant progress and may potentially impact the Bitcoin price after halving. BRC-20 references a standard applied to create and issue smart contracts on the blockchain. Ordinals make it possible to inscribe individual data pieces directly onto the smallest Bitcoin unit, a Satoshi.
This enables the creation of one-of-a-kind digital artifacts on the blockchain. These technologies support a wider range of applications and digital assets, expanding the flagship crypto's functionality beyond transactions. In parallel to Bitcoin's growth, these developments underscore its current relevance and future growth potential. They are expected to contribute to a higher Bitcoin price after halving.
5. Lack of clarity on the Fed's benchmark rates
The final factor to consider when predicting the Bitcoin price after halving is the US Federal Reserve's policy on benchmark rates. Bitcoin's rate of issuance is predictable and declining. In contrast, a great deal of uncertainty surrounds Fed policy. If the Fed lowers benchmark rates, US Treasury yields will drop correspondingly, making Bitcoin and other risky assets more appealing to investors.
However, economic data has been positive in the past few weeks, and lowering rates could push inflation back up. On the other hand, keeping them high for too long puts the economy at risk of a recession. According to a report by Grayscale, market inflation is expected to increase because a number of central banks have cut rates despite solid economic growth. The Bitcoin price after halving could be higher because higher inflation stimulates demand for alternative value stores.
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