Unlike altcoin spaces, the Bitcoin blockchain is not accustomed to constant innovation and changes. This reputation has earned and maintained its top position as the leader of the crypto world, which is no small feat in the ever-changing world of digital currencies.
However, when Bitcoin changes, the entire crypto ecosystem feels the reverberations. Few events create as much hype and speculation as the halving, which occurs once every four years on the BTC blockchain and slices miner rewards in half.
The main reason for this is to drive scarcity, one of the main reasons Bitcoin continues to be the most coveted crypto and the one with the most significant market capitalization. No matter what happens, investors are still looking for the best exchanges where to buy Bitcoin.
While all cryptocurrencies can expect changes in the aftermath of this event, 2024 is different from previous years. The reason is simple: the Bitcoin market has also changed fundamentally.
Overview
It’s important to have a very clear idea of what the halving represents to get a better idea of what investors can expect. Right from the launch, Bitcoin had a predetermined maximum supply of twenty-one million coins.
No additional coins will be released after this limit is achieved. At the moment, there are only about two million BTC left, and investors predict that they will all be mined by 2140. The halving, as the name implies, refers to the halving of the rewards the miners get for validating transactions and getting them added to the blockchain.
The halving occurs approximately once every 210,000 blocks or once every four years. All crypto community members widely anticipate the event because of its effects on pricing. While the impact is not immediate, historical data suggests that the prices rally anywhere between five and twelve months after the halving.
After all of the previous ones, the price point reached a new all-time high. For instance, Bitcoin’s all-time high levels of 2021 resulted from the 2020 rally.
What makes 2024 different is that the price has already surpassed an all-time high roughly two months ahead of the halving. This is unusual and a sign most investors take to signify that the marketplace is becoming more mature and reliable.
The approval of the exchange-traded funds was essential for market growth. Investors had been anticipating it for a long time, so when the asset class was finally officially approved, it didn’t take long to deliver excellent results.
The current halving is predicted to be considerably more robust than the previous ones, mainly because it also has ETFs to rely on.
Crypto Miner Income
Source: Canva Pro
The miners are naturally the cohort most interested in the halving and what it entails, as their income depends on it. Mining is a complex process that involves high computational power and puzzle-solving endeavors.
Special hardware is necessary to complete these math problems, and the first miner to successfully crack the answer is awarded newly minted coins. The transaction fees also go to the miners.
After the halving that will take place this April, mining rewards will go from 6.25 BTC to 3.125 BTC. This will naturally affect the profitability of the operations. Miners using older and less efficient hardware will be more affected.
Some have even begun discussing the possibility of relocating to other regions where the costs will be cheaper. Some of these markets include Ethiopia and Argentina. Some could leave the mining environment for good.
As of March, the mining costs per coin are $41,000, but rising values have kept profitability mostly intact so far. The cost ratio dropped from almost 2 to 0.66 at the beginning of the previous year.
After the halving has been completed, some believe that only the most efficient miners will continue operating, and this will undoubtedly affect the overall market. But some think profit-making won’t be as tricky as the predictions show and that the high BTC prices will also result in higher mining costs.
Tokenomics
Tokenomics is the research that follows the economic models that power cryptocurrencies and other digital assets. It deals with several factors, including supply dilution, distribution, utility, and stability. In Bitcoin’s case, its deflationary nature and fixed supply are the central aspects of its tokenomics.
When the halving arrives, the inflation rate is reduced, keeping the market steady and not allowing it to spiral out of control. The supply rate lowers as new coin issuance decreases. This leads to scarcity, an essential aspect of Bitcoin’s enduring value and importance for crypto traders.
When an asset is rarer, it is also more valuable, with precious metal being the prime example. Since Bitcoin has a fixed supply that will never be mined and issuance rates slow down periodically, it makes sense why it has earned the nickname “digital gold” among investors.
The decreasing supply growth is also in stark contrast with how fiat currencies operate. Bitcoin is also not subjected to inflation rates decided upon by financial institutions.
Historical Data
Source: Canva Pro
Even though the Bitcoin marketplace is associated with increased stability compared to the altcoins, it is still subjected to serious fluctuations. Nonetheless, trends can be observed in the marketplace during both short—and long-term frames, and traders discuss these fluctuations when making predictions.
Historical data is vital for the halving as well. It is associated with strong bullish tendencies. However, it typically takes at least five months post-halving for the impact to show. The all-time highs of 2021 are a perfect example, as they were the result of the 2020 halving.
But in 2024, a new all-time high level was achieved several weeks ahead of the next halving, something for which there is no precedent. Growing adoption and engagement rates as a result of the halving, as well as increasing numbers of investors joining from the institutional and retail sectors, change the landscape as well.
So, while historical data remains relevant, the gains might be much more elevated than anything investors have seen before.
The Bottom Line
Halvings have led to new all-time high prices in the past. In fact, this feature has remained so consistent over the years that there is now no doubt in the minds of investors and analysts that the same thing will happen this time as well.
Historical data can definitely serve as an indicator of the evolution users can expect, but it will likely still be some time until the full scope of the halving becomes plain to see by everyone. Some actually expect this rally to be more far-reaching than the ones that came before it.
The reason for this is the arrival of the exchange-traded funds which will definitely give the halving a further boost. Bitcoin has already reached a new milestone and broke its previous records even in the absence of the halving simply because the Securities and Exchange Commission finally approved the ETFs.
Due to this factor, some traders have said that the relationship between supply and demand created within the market might end up being more impactful for the price point than the halving in the upcoming years.
Some researchers are convinced that Bitcoin’s popularity will keep on growing as a result of the difficult political and economic situations all over the world. Inflation and instability have impacted many countries, and although things are gradually improving many people remain unconvinced and skeptical about the potential of the traditional systems and markets.
BTC offers a solution in this regard through the features and functionality brought on by its decentralized nature. Since the blockchain is not aligned with any central authority, investors can be confident that their assets cannot be frozen, and that they remain anonymous.
Many are starting to have doubts about the local fiat currencies in their own countries, as well as the profitability of traditional assets. Given the fluctuations that have occurred and which led to the devaluation of many different products and holdings, an ever-growing number of investors have started moving toward riskier assets like cryptocurrencies.
BTC in particular is well-known for its use as a store of value, a reputation the altcoins were much less successful in obtaining. Nonetheless, it will still be some time until digital assets gain the same level of acceptance within the marketplace as other stocks, bonds, real estate, precious metals or standard currencies.
There are also economists who believe that the current halving will not lead to rallies similar to those that occurred in the past and that the new all-time high reached in March was the combined result of the ETFs and the anticipation for the next halving.
According to this scenario, all the later effects are much more likely to occur in the mining sector, which needs consolidation since the lower hash rates caused a decrease in profitability. But as always in the crypto world, only time will be able to tell how things evolve.
If you want to protect your portfolio, you must be ready to take the necessary steps to secure your holdings. Choose a reliable strategy and stick to it. Even though the marketplace is changeable, consistency will take you far.
