In a landscape as volatile as crypto, there are very few trends that investors can follow with any degree of certainty. Despite its erratic nature, one of the cryptocurrency ecosystem’s strongest trends has revolved around Bitcoin’s halving events every four years.
The coin went on to smash through its all-time high values in the months that followed its previous halving events, and now with the next one set for 2024, could investors expect a fresh rally?
There are many reasons for cryptocurrency market speculators to be excited for a prospective Bitcoin (BTC) halving event. The market dominance of BTC means that any price rallies for the world’s most famous crypto asset means that the entirety of the market is likely to experience a major bull run.
As Bitcoin’s stock-to-flow model (where stock is the total existing supply of a commodity—or a cryptocurrency like Bitcoin and flow is the new supply of the commodity or crypto that is created each year) shows, the cryptocurrency peaks at roughly the same stage in its halving cycle.
Should this trend continue, we may see BTC surpass its most recent all-time high market values of November 2021 and soar to a considerably higher market price. But just how reliable is this metric? And what does a halving event actually involve? Let’s take a deeper look at Bitcoin’s halving cycles and what they actually mean for investors:
What is a Bitcoin Halving Event?
Bitcoin undergoes a halving event approximately every four years. This sees the block rewards distributed to Bitcoin miners halve, hence its name.
This process will continue for many years until around the year 2140, when the total supply of BTC of 21 million is finally reached.
Bitcoin’s halving events are significant because they mark another drop in the rate of new Bitcoins being produced on the way to reaching its total supply. At present, the number of BTC in circulation stands at just over 19.3 million, indicating that there are fewer than 1.7 million left to mine.
When Bitcoin was launched in 2009, the reward for each block mined was 50 BTC, but the first halving event in 2012 saw this supply halved to 25. Subsequently, the 2016 halving event saw rewards cut to 12.5, and finally 6.25 in the most recent halving event on May 11, 2020.
However, as the chart shows, each halving event brought a fresh Bitcoin rally in its wake. Following Bitcoin’s 2016 halving, months of accumulation resulted in a new all-time high of $19,783.21 on December 17, 2017.
In the wake of the 2017 rally, Bitcoin and the wider market descended into a crypto winter until the 2020 halving event, which ultimately paved the way for a fresh all-time high of $69,044.77 in November 2021.
Since its most recent peak, Bitcoin has descended into another crypto winter with harsh economic headwinds forcing the cryptocurrency to retrace at a significant rate. But should investors be optimistic for 2024’s next halving?
While Bitcoin is often referred to as ‘digital gold,’ the notion of the supply of gold being halved every four years would lead to unimaginable price rises. Should demand for Bitcoin continue to grow, this would logically mean that Bitcoin would continue to become more scarce in the face of demand.
Is Bitcoin Heading to the Moon?
While there are certainly a number of caveats to keep in mind, there’s plenty of optimism that market commentators are drawing from Bitcoin’s halving events.
“$180k; that’s the target,” stated Decentrader Crypto Analytics Founder ‘FilbFilb’ on Twitter. The user, who has amassed a following of more than 85,000 on Twitter, has based their calculations heavily on the Bitcoin halving event, which they believe will be a catalyst for a fresh all-time high for the cryptocurrency.
“Bitcoin halving is due for March 2024. If history is anything to go off then you have 18 months absolute max…before we start doing all sorts of crazy stuff above the all-time high again,” FilbFilb added.
This sentiment has also been echoed by famous CryptoQuant Analyst ‘Plan B.’ As a user who frequently utilizes Bitcoin’s stock-to-flow model, Plan B took to Twitter to say that their metrics indicated a BTC value of over $32,000 at the time of Bitcoin’s 2024 halving event, and an eventual 2025 bull market which will see BTC reach values in excess of $100,000.
Given that Bitcoin hasn’t attained a value of more than $30,000 since June 2022, predictions of beyond $100k appear ambitious at first glance, but they’re shared across the crypto ecosystem.
“If the block rewards get cut in half to 3.125 from 6.25, then the price has got to double-ish in order for the miners to continue to make money,” said Hedge Fund Manager Mark Yusko. “Traditional assets are driven by economic growth, Fed policies, inflation. Crypto is driven by the technology itself, millennial adoption,” Yusko added, noting that ‘the laws of math’ dictates that the upcoming halving event can push Bitcoin beyond $100,000.
Embracing a Changing Market
In cryptocurrency, perhaps more so than anywhere else, past performance should never be a guarantee for future performance. Bitcoin’s halving event has held a strong correlation with market-wide rallies, but the most recent path to a new Bitcoin all-time high was buoyed by remarkably low Fed interest rates moving away from the Covid-19 pandemic which led to far greater levels of liquidity among investors.
Furthermore, Bitcoin’s recent rally was less pronounced than those before it, indicating that halving events may be weakening.
Historically, the cryptocurrency markets have maintained a correlation with traditional tech stocks. With this in mind, traders can generally look to the Nasdaq-100’s performance to anticipate a change of fortunes in the likes of Bitcoin.
Institutional adoption can help to stabilize the volatility of Bitcoin, leading to better market sentiment and higher price rallies. The arrival of more institutions into the crypto landscape will also demand a more sophisticated market, powered by decentralized finance applications. In turn, paving the way for crypto’s transition into more mainstream markets.
SKARB offers a driving force for change within the cryptocurrency landscape for institutions, mitigating the prospect of counterparty risk in an ecosystem that’s been blighted by the high-profile collapses of exchanges like FTX. Should a counterparty fail for whatever reason, it can result in high-profile reputational and economic damage, as well as causing institutions to lose out in terms of time, effort and productivity.
The unified system offered by SKARB empowers institutions by acting as an all-in-one toolset for trading across several popular exchanges. While upholding maximum levels of encryption, institutions will have the freedom to utilize the SKARB terminal to execute trades via a vast range of market makers.
Through consolidating all trades within one single app-based terminal, SKARB also enables institutions to effectively audit themselves as they build into the cryptocurrency ecosystem, helping them to become more efficient and effective. It’s through platforms like this that institutional acceptance and greater crypto market stability can be assured.
Looking to 2024
It certainly pays to err on the side of caution when it comes to identifying trends in crypto. However, Bitcoin’s halving cycles point to one of the only trends on the market that’s occurred three times and delivered fresh all-time highs each time.
Although times are changing at a rapid pace in the world of cryptocurrency, decentralized finance and Web 3.0, the prospect of Bitcoin’s upcoming price accumulation could be worth exploring on a deeper scale for institutional investors. Although there’s certainly risk, Bitcoin’s continued ability to confound its critics deserves more attention.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Dmytro Spilka
Dmytro is a finance writer based in London. His work has been published in The Financial Express, The Diplomat, IBM, Investing.com, FXEmpire, Investment Week and FXStreet.
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