As Bitcoin’s price reaches new heights, attention is turning to its upcoming “halving” and whether it is playing a crucial role in its ascent. As we all know, halving is a vital event that will burn Bitcoin’s value as an increasingly scarce commodity; it’ll be interesting to navigate what to expect post-this event.

About Bitcoin Halving

The Bitcoin network creates new Bitcoins every ten minutes. For the first four years of its existence, 50 new Bitcoins were released every 10 minutes. This number is halved every four years. When the money is divided in half, it is known as “halving” or “halvening.”

The number of new Bitcoins released every 10 minutes fell from 50 in 2012 to 25 in 2013. It further fell from 25 to 12.5 in 2016. Additionally, the reward was reduced from 12.5 in 2016 to 6.25 per block in the most recent halving that happened on May 11, 2020.

After the 2024 halving, the reward will further be reduced from 6.25 BTC to 3.125 BTC. Despite previous halvings that have always contributed to bullish sentiments in the crypto market, the future remains unpredictable, with recent price highs and a crowded mining landscape adding to the suspense. For more details on Bitcoin halving, read here.

Recent Developments

In the months leading to the halving, significant developments, such as the approval of the first spot Bitcoin Exchange-Traded Funds (ETFs) in the US and Bitcoin reaching an all-time high of $73,679, have intensified speculation on post-halving outcomes.

Established players in traditional finance, such as BlackRock and Fidelity, have embraced Bitcoin as a portfolio asset to enhance diversification and bolster risk-adjusted returns for their trillion-dollar clientele. Even a modest allocation, such as 1%, of their assets towards Bitcoin ETFs could trigger significant demand. The launch of these ETFs has already resulted in a substantial capital influx within just two months. BlackRock’s ETF has amassed over $9 billion in Assets Under Management (AUM), while Fidelity’s counterpart has attracted more than $6 billion. These figures are remarkable for recently introduced ETFs, with trading volumes comparable to the most active ETFs globally.

The institutional embrace of Bitcoin is in its nascent stages, with current spot ETF exposure actively managed by asset managers. However, the true surge in capital inflows is anticipated from passive investments in the asset class, where BTC ETFs will form part of broader portfolio acquisitions. Fidelity in Canada, for instance, offers an “All-in-One” investment product to clients, incorporating exposure to diverse asset classes, including a 1-3% allocation to BTC ETFs. Should this trend extend to other asset managers, a sustained upward pressure on BTC prices is foreseeable.

Bitcoin Price Trends Post Previous Halvings

Bitcoin’s inaugural block, mined on January 3, 2009, rewarded 50 BTC. On November 28, 2012, the first halving reduced the reward to 25 BTC per block, coinciding with Bitcoin’s value of $12.20.

Fun Fact: Investing $100 in BTC during the first halving would have yielded approximately 8.9 BTC. Holding until March 13, 2024, when BTC hit its recent all-time high, would have grown the $100 investment to $655,743.

Following the first halving, BTC surged from $12.20 to around $1,000 by the end of 2023.

The second halving occurred on July 9, 2016, lowering the block reward to 12.5 BTC. At that time, Bitcoin was valued at approximately $640, rising to $2,550 by July 2017.

On May 11, 2020, the third halving took place, reducing mining rewards to 6.25 BTC per block, with Bitcoin trading around $8,750. Within a year, Bitcoin reached an all-time high of about $62,000.

For a detailed historical price analysis of Bitcoin in the past halving events, click here.

Potential Network Security Issues

Beyond price concerns, there are lingering uncertainties regarding network security after the halving.

At one extreme, potential security vulnerabilities arising from the halving exist, particularly concerning smaller miners. With rewards set to halve, miners operating on the brink of profitability may face the risk of being marginalized. This situation could prompt these miners to contemplate selling off or exiting the scene without support.

Such a scenario could potentially disrupt mining availability, leading to fluctuations that reverberate across the Bitcoin network, resulting in decreased hash rates and compromised overall security.

However, at the opposite end of the spectrum, previous halving occurrences have had minimal observable impacts on network security. Many analysts anticipate a smooth trajectory for the network, devoid of significant security concerns.

This brings us to what miners and investors should do to prepare for the upcoming Bitcoin halving.

Preparing for the Next Bitcoin Halving (Expectations and Preventive Measures)

For Miners

As a miner, evaluate post-halving profitability carefully. The diminished reward may necessitate upgrading to more efficient mining hardware or reducing electricity costs to sustain profitability.

Monitor changes in hash rate and mining difficulty closely. A substantial decrease in hash rate following the halving could temporarily impact transaction speeds and network security.

For Investors

Use advanced technical analysis techniques to anticipate price fluctuations. Analyze indicators such as moving averages, RSI, and Fibonacci retracement levels, taking into account the effects of reduced supply.

Ensure adequate liquidity to capitalize on potential price swings. This may involve adjusting portfolio allocations or securing access to swift funding sources.

If you anticipate a market pattern similar to past halving events, where Bitcoin prices surged, consider employing Dollar-Cost Averaging (DCA) as an investment strategy. However, it is crucial to conduct thorough research and invest within your risk tolerance—never invest funds you cannot afford to lose.

Future Expectations

As the 2024 halving approaches, speculations range from immediate spikes to long-term projections exceeding $250,000. However, uncertainties persist regarding short-term market movements and potential drawbacks post-halving.

Conclusion

The Bitcoin halving event evokes a mix of anticipation and caution. While historical data provide insights, the future remains uncertain, emphasizing the need for prudent investment strategies and vigilance in navigating the volatile cryptocurrency landscape.