As the saying goes, ‘ Too much of anything is good for nothing’ , the same can seemingly be applied for Bitcoin (BTC) too. While fiat currencies can be tracked by central banks, the same can’t be said for a cryptocurrency such as BTC. In order to ensure that BTC-induced inflation doesn’t go up, the BTC halving event came into action. From what it’s understood, BTC halving refers to the reduction of reward from BTC mining in half, which takes place every four years. “I believe this finite nature of BTC is what makes it the store of value or digital gold that it is, and such halving events have been marked by increases in the BTC price within a few months. While BTC halving has traditionally been bullish for the cryptocurrency market, we also have to consider the gradual decrease in the quantity of supply shock resulting from such halving events,” Kumar Gaurav, founder and CEO, Cashaa, a blockchain company, told FE TransformX.
The timeline for BTC halving events can be traced back to November 2012, when the mining reward was reduced from 50 BTC to 25 BTC. Post that, the second BTC halving event took place in July 2016, which brought the reward down from 25 BTC to 12.5 BTC, and in May, 2020, the reward got reduced from 12.5 BTC to 6.25 BTC. For 2024, the BTC halving event is expected to take place in either April or May, which will see the mining reward fall from 6.25 BTC to 3.125 BTC. Going by media reports, the current BTC inflation rate is close to two percent, which should go down after the 2024 BTC halving event. The main question which is believed being asked is what will the 2024 BTC halving event have in store for the cryptocurrency’s investors? Market experts believe that the 2024 BTC halving event is a requisite, post the 2022 crypto winter and the 2023 economic deflation. Reportedly, the 2024 BTC halving event is considered crucial because it can bring control over the total BTC count, along with investors being able to navigate their portfolios during uncertain economic situations. It’s believed that gold investors have a preference for BTC halvings on account of being similar to gold mining, as it helps control the supply. Market research has shown that BTC halvings are beneficial for prolonged gold investors, due to both BTC and gold being deflationary.
“By slowing down the rate at which new BTCs are generated, the halving can ensure that BTC’s supply remains finite and limited to 21 million. I think one of the impacts of an event like this is the decrease in the inflation rate of BTC. As for the price, the BTC price was $8,787 at the time of the last halving in May, 2020, and rose to an all-time high of nearly $69,000 by November, 2021, which showed a 685% increase. It seems to be clear that the price of BTC will increase after the halving, but how much would depend on the demand at that particular point in time. Experts (JP Morgan) predict that the price of BTC will zoom to over $100,000 and potentially go up to $700,000 in a year or two after the halving event,” Saravanan Jaichandaran, co-founder and chief data scientist, bitsCrunch, a blockchain analytics firm, highlighted.
Apart from economical reasons, technological reasons have also been enlisted as important for the 2024 BTC halving event, as it can enable miners to enhance their efficiency. For miners to remain profitable despite the decrease in the BTC mining reward, the 2024 BTC halving event can lead to the development of mining spaces which have increased capabilities and can ensure energy savings. Since BTC’s total mining count cannot exceed 21 million, market reports have seemingly held it as the main factor for the 2024 BTC halving event. Price predictions laid by CoinCodex, a cryptocurrency data website, have shown that BTC price can reach $49,300 by April, 2024, with price expectations of $84,100 post the halving. BitQuant, a cryptocurrency exchange, has mentioned that BTC can reach a $250,000 value after the halving event. Smart Valor, an investment platform, has provided numbers for increase in BTC price for the previous halving events, which stood at a 385% increase for the 2012 halving event and at a 5,089% increase for the immediate next year, a 142% increase for the 2016 halving event and at a 284% increase for the immediate next year, and a 17% increase for the 2020 halving event and a 559% increase for the immediate next year.
Analysts have suggested that the 2024 BTC halving event can lead to a bullish sequence of events, on the back of macroeconomic and technological factors. “I believe that exact post-halving price predictions are challenging due to the complex interplay of factors. Investors should approach the halving event with a comprehensive strategy, considering historical patterns, regulatory developments, technological advancements, and broader market conditions. Diversification and a nuanced understanding of the evolving crypto landscape remain essential for navigating potential opportunities and risks,” Sumit Ghosh, co-founder and CEO, Chingari, a Web3.0 live streaming application, concluded.
