The Bitcoin halving (around April 20, 2024) will change the rules of the game, with repercussions on the price of the cryptocurrency.
There are 3 reasons why the 2024 Bitcoin halving will be different from all the others. The halving, the moment in which the amount of bitcoins generated by the network is approximately halved every ten minutes, typically occurs every 210,000 bitcoins mined, i.e. every four years.
Halving represents a mechanism intrinsic to the Bitcoin blockchain algorithm, designed to regulate the supply of this cryptocurrency, the maximum quantity of which is set at 21 million units.
2024 is the fourth halving event in Bitcoin’s history and is expected to occur around April 19-20, although some suggest it could occur even earlier. In the past, Bitcoin price action in the months following the halving has seen new highs being reached, but this may no longer be the case this time around for several reasons.
1. Spot ETFs alter demand
The approval of Bitcoin exchange-traded funds (ETFs) in the United States has fundamentally changed the cryptocurrency’s financial landscape. In January 2024, the SEC gave the green light to 10 Bitcoin ETFs, triggering a massive influx of capital and a rapid increase in the price of Bitcoin, which reached $71,800 (+70%).
These ETFs have the potential to transform the supply and demand dynamics of Bitcoin, with capital inflows representing approximately 5-7 times the new units of Bitcoin generated daily. This new financial instrument makes Bitcoin more accessible and attractive to a broad base of investors, both institutional and retail.
However, while Bitcoin ETFs offer clear benefits, it is important also to consider the potential risks and long-term implications. The increased demand generated by ETFs could influence prices and market volatility, especially given the event at the end of April.
leggi anche
Crypto’s new clothes may not prove a good fit
2. Fewer Bitcoins available for trading
Since 2020, there has been a steady decline in the availability of Bitcoin for trading, a significant trend compared to previous halving cycles. This decrease could indicate that investors are holding long-term positions and are less inclined to sell in response to short-term price fluctuations.
With over 19 million Bitcoins in circulation and a cap of 21 million, the halving makes mining more challenging and cuts incentives for miners in half. Normally, miners liquidate Bitcoin before the halving to cover operating expenses, but Bitcoin’s recent rally has led to a decrease in selling by miners, who keep up to 1.8 million Bitcoin in their reserves. This trend contributes to a greater scarcity of available Bitcoin on the market, potentially having significant implications on the cryptocurrency’s price and liquidity.
3. Fed rate cut
Another key factor to consider during the upcoming halving concerns the possible rate cut by the US Federal Reserve.
The general thesis is that if the Fed cuts rates, US Treasury yields will weaken, making risky assets, such as cryptocurrencies, more attractive. However, economic data continues to show strength, fueling doubts about the timing of the next rate cuts. Cutting too soon could reignite inflation, but keeping rates high for too long could push the economy to the brink of a recession.
|DISCLAIMER
The information and considerations in this article should not be used as the sole or primary basis for making investment decisions. The reader maintains full freedom in his own investment choices and full responsibility in making them, since only he knows his risk appetite and his time horizon. The information contained in the article is provided for informational purposes only and its disclosure does not constitute and should not be considered an offer or solicitation to the public for savings.|
Original article published on Money.it Italy 2024-04-09 07:50:00. Original title: 3 motivi per cui l’halving Bitcoin 2024 sarà diverso da tutti gli altri
