With the Bitcoin halving event in sight, the cryptocurrency market is booming with speculation and anticipation. The halving, a fundamental event in Bitcoin’s lifecycle, has historically been associated with significant price rallies. However, as the date approaches, traders find themselves grappling with divergent opinions regarding the potential outcome this time around.
What is Bitcoin halving?
Bitcoin halving is an event that occurs approximately every four years in the Bitcoin network. It is a pre-programmed adjustment to the Bitcoin protocol that reduces the reward for mining a new block by half. There will only ever be 21 million Bitcoin. Currently, more than 19 million Bitcoins have already been mined, leaving under 2 million left to be created.
When Bitcoin was created, the reward for mining a block was set at 50 Bitcoins. After approximately every 210,000 blocks are mined, the reward is halved, leading to a reduction in the rate of new Bitcoin creation. This process is known as halving.
At halving, the amount of Bitcoin available to miners is cut in half. This makes mining less profitable and slows the production of new coins. This scarcity strategy has enhanced Bitcoin’s value in earlier events. For example, a year after the May 2020 halving, the cryptocurrency saw over a 545 percent increase in value.
The previous halving events occurred on November 28, 2012, July 9, 2016, and May 11, 2020. Data platform CoinGecko expects the next halving event to occur on April 20, 2024.
Market sentiment diverges
As the crypto market awaits the halving event, participants find themselves divided over the potential trajectory of Bitcoin’s price. Some expressed uncertainty due to Bitcoin’s surge to a historic high before the halving event. Meanwhile, other analysts suggest a potential 160 percent surge in the cryptocurrency’s price in the year post-halving, potentially pushing it to a new all-time high exceeding $150,000.
However, skepticism looms among other market players who cautioned against blind faith in historical patterns. Some analysts believe that halving has already made its impact on Bitcoin prices with the recent surge to $73,803.25 in March. Moreover, the introduction of new U.S. spot Bitcoin exchange-traded funds (ETFs) and the anticipation of institutional investment influx have played significant roles in driving up demand for Bitcoin.
Besides, broader economic factors, including looser monetary policies and the influx of retail investors into cryptocurrencies, add layers of complexity to the market landscape. Researchers stress the need to consider these external influences alongside the Bitcoin halving’s historical significance.
Read: Geopolitical tensions, stagflation risks boost gold rally in March: WGC report
Future outlook
Despite the uncertainties surrounding the upcoming Bitcoin halving event, optimism persists within the cryptocurrency community. Some argue that the convergence of factors, including ETFs and anticipated monetary policy changes, could propel Bitcoin to new heights in the year following the halving. Meanwhile, others highlight the potential for significantly higher prices, contingent upon favorable inflation prints and accommodative monetary policies.
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