Why the fourth Bitcoin halving may be a dud

Last year was certainly not marked by Bitcoin. Although this largest cryptocurrency still remained at the forefront of the pack in terms of capitalization, the large drops in 2022 compared to the previous year certainly did not fill investors with optimism. What's more, Bitcoin still can't get out of the hole and its price is now over $25, compared to over $500 last year.

Bitcoin price chart in recent years. Source: Investing.com

Investors therefore have every right to worry about the upcoming event in the cryptocurrency market, which may shake not only Bitcoin. Optimists say that the upcoming halving may cause a wave of enthusiasm in the market of digital currencies in the blockchain network, while pessimists have the opposite opinion. But how is it really? We will consider this by presenting the opinion of experts on halving.

Consequences of Bitcoin halving for the cryptocurrency market

It is certain, however, that halving will have an impact on the cryptocurrency landscape. The essence of this event is best described by Maxim Manturov, Director of Investment Advisory at Freedom Finance Europe. According to Manturov:

“There are many factors that make up or down Bitcoin prices. 

Bitcoin halving in 2024 will be one of them. It's an event that happens every 210 blocks, or about every four years. When a halving occurs, the reward for successfully mining a block is halved - hence the name. This means that the supply of new Bitcoins entering the market is reduced, which may lead to an increase in Bitcoin prices.

There are several reasons why Bitcoin halving can be a driving force for growth. First, it reduces the supply of Bitcoin, which could make the cryptocurrency scarcer and more valuable. Secondly, it increases the demand for Bitcoin as mines will have to buy more Bitcoin to cover their costs. Third, a positive feedback loop is created by attracting investors with rising prices, which pushes the price up even further.

The Bitcoin halving events that have taken place so far have been associated with a significant increase in the price of Bitcoin. The first halving took place in 2012, and the following year the price of Bitcoin increased from $12 to over $260. The second halving occurred in 2016, and then the price of Bitcoin rose from around $600 to over $20 over the next two years.

Bitcoin price increase after the second halving in 2016-2018. Source: Yahoo Finance 

So the data speak for themselves. Bitcoin halving in previous years was associated with significant increases, and in the case of the aforementioned second halving event, there was a real explosion in the popularity of this largest cryptocurrency.

Investors who are wondering how to buy shares and now decide to choose more secure companies from the Dow Jones index, so they can move towards cryptocurrencies. Not only Bitcoin prices, but also other, smaller digital currencies in the blockchain network may increase. During previous halvings, the value of Ethereum, Dogecoin and Litecoin also increased in a similar way. Therefore, there are many indications that the cryptocurrency market may slowly return to favour, which may be signified by increases in the markets of technological companies. 

Other positive signals may add to this, such as the return of investors to cryptocurrencies after the series bank failures, both in the United States and in Europe. Other analysts, such as Luno exchange vice president Vijay Ayyar, confirm Manturov's words. Ayyar claims that Bitcoin should bounce back from this level, which will result in an increase in the price of this cryptocurrency.

Interestingly, it is impossible to determine the exact date of the halving at the same time. The cryptocurrency market is not as predictable as the stock market. In the case of traditional shares, the dates of dividend payments, quarterly reports and share splits are predetermined and known to investors. In the case of Bitcoin, however, the term is not specified in detail. 

So no one knows when this will happen. However, the algorithm indicates that, taking into account the current work of the excavators, it will take place in May or June 2024. This will be almost exactly four years after the previous halving. Investors should therefore try to anticipate this date to ensure the best possible time to enter the purchase of cryptocurrency. 

It won't be the last halving either. The next such event should take place in the next four years, around 2027. The halving will last until the rewards for mining the block amount to less than one Satoshi, i.e. the smallest indivisible fraction of Bitcoin. The last halving is expected to take place in 2140, and no new Bitcoins will be created after it. This means that there will be about thirty more halvings, unless the algorithm changes. This is also possible, and any changes are decided by the mines, which have a voice depending on the power of the CPU they use for mining.

Of course, this does not mean that only a bright future awaits Bitcoin. There are still unresolved issues that can negatively affect the reception of cryptocurrencies by investors. ongoing proceedings against Binance, belonging to the leading cryptocurrency exchanges, and the pressure of state financial market regulators may reduce confidence in Bitcoin, and even more in currencies with limited capitalization. Ultimately, it may be crucial to observe the entire cryptocurrency ecosystem and follow the news from this market. 

Sponsored article