This coming weekend, the highly anticipated fourth Bitcoin halving event will occur. This is a quadrennial event, and one of the greatest expectations is that it can drive a significant increase in the cryptocurrency price. Bitcoin has been going through a phase of price stagnation for some weeks, contributing to the anticipation for this next halving.
The halving will reduce the daily output of bitcoins by 50% for miners, who address blockchain issues in exchange for additional tokens through the execution of complex mathematical tasks. Through this fixed reduction, over a four-year cycle, from the issuance of 900 bitcoins per day to 450, the Bitcoin protocol aims to keep the total supply of bitcoins at 21 million to preserve their long-term value. However, at this moment, there are exactly 19 or 20 million bitcoins in circulation.
Throughout history, halving occurrences have proved to be the most crucial reason behind the tremendous price increase of Bitcoin in the crypto world. However, each halving in 2012, 2016, and 2020 had a remarkable growth of over 8,000%, followed by notable jumps of 284% and 559%. According to Tom Essaye from Sevens Report’s analysis, these economic principles manifest as follows: when supply falls and demand stays high or rises, such a state often brings higher prices.
While previous halving events were considered an indicator of Bitcoin’s price fluctuation, this approach may be too straightforward. While some bitcoin enthusiasts deny that the cryptocurrency is too expensive to be a big deal in the real world, others consider relying solely on the last three halvings as a basis for future BTC price predictions to be unreliable. In addition, external factors such as political tensions have a substantial impact on the price of Bitcoin, as evidenced by the 10% decline in its value subsequent to an Iranian drone strike against Israel. This enables us to determine the price volatility of cryptocurrencies.
Despite these skepticisms, however, some analysts remain optimistic regarding Bitcoin’s future. Gautam Chhugani, a Bernstein analyst, cites an additional instance in which he argues that the price of Bitcoin increases not only due to the halvings themselves but also due to new demand catalysts that accompany these events. He pointed to January’s approval of spot bitcoin exchange-traded funds, which brought significant new capital into the market, as one of the main factors that led to the recent price hikes. Chhugani is optimistic; he predicts that Bitcoin might go up to $150,000 next year.
The halving event not only affects investors, but also the miners engaged in this procedure to a tremendous degree. The revenue of miners may be significantly impacted by this unfavorable situation, particularly in light of the declining stock prices of American mining firms such as CleanSpark, Marathon Digital, and Riot Platforms. Nonetheless, this pressure may lead to industry consolidation, resulting in a more profitable and efficient mining sector.
To summarize, while the upcoming Bitcoin halving may yield profits similar to previous events, the complex combination of technical elements and external influences makes it impossible to predict the outcome. The stakeholders, who range from investors to miners and everyone in between, will be on the edge of their seats, waiting for another chance for the golden past to recount its familiar story in their favor.
