Global Economic Factors Influencing the 2024 Bitcoin Halving Outcome

Bitcoin is a digital currency that started in 2009 and works on a system that doesn't rely on central authorities, using blockchain technology instead. Every four years, Bitcoin goes through an "halving" event, where the reward for creating new Bitcoin is cut in half. This slows down the creation of new Bitcoin. These halving events have often led to big changes in Bitcoin's price, catching the interest of people who invest in or study the economy.

The next halving in 2024 will occur when the world's economy is facing many challenges, like changing inflation rates, new rules about digital currencies, and other big global financial issues. These challenges could affect Bitcoin's value around the time of the halving. Since the COVID-19 pandemic, inflation has increased in many places, making people look for other ways to protect their money. 

At the same time, governments and groups that make rules about money are considering new laws for digital currencies, which could change how the market works. Also, the stock market and big world events continue to influence people's feelings about investing in digital currencies like Bitcoin.

Macroeconomic Factors and Their Impact on Bitcoin

Inflation, a measure of the rate at which the general level of prices for goods and services rises, reduces purchasing power over time. In response to this, people start looking for other places to put their money where it won't lose value as fast. 

Some investors will look at digital currencies like Bitcoin, which is appealing to many people because it's not controlled by any government's rules on how much money is in circulation, which often causes inflation. In times when inflation is high in some countries, more people have been buying Bitcoin, hoping it will hold its value better than regular money. This has sometimes led to Bitcoin's price going up because more people want it as a safe place for their money.

Lately, how countries regulate Bitcoin has affected how people can buy, sell, or use it. In places where the rules have been clear and supportive, more people have started using Bitcoin. But it's been harder for people to get into Bitcoin in places with stricter rules. These government decisions can change how people feel about investing in Bitcoin.

Additionally, when the block rewards decrease after a halving, it directly affects how much money miners make. They get less Bitcoin for each block they add to the blockchain. This means less money coming in for miners, which can be tough for those who have high costs like electricity and equipment maintenance.

The halving also affects how competitive the mining business is. Some miners might not make enough money to stay in business, so they might stop mining. This could lead to less computing power keeping the Bitcoin network secure. But miners who can keep their costs low might still make enough money to stay in business.

Mark Zalan, CEO of Bitcoin mining company GoMining, shared his thoughts, saying, "The economics of the mining business have remained excellent for the past 10+ years. Halving events were negated by price appreciation, keeping the revenue pool more than attractive.

"We don’t have any reason to expect a different outcome this time around. The revenue will still be there, but it will be redistributed differently among market participants, with continuous operational optimization and reinvestment differentiating between those impacted positively and those impacted negatively," Zalan continued.

"Higher electricity costs and stricter regulatory environments translate into expenses, and similar to any other industry, mining is constantly searching for opportunities to optimize operational expenses. The halving event may highlight and amplify this process in a way that’s unique to the Bitcoin mining industry, but the nature of business fundamentals remains the same."

The overall financial world also plays a big role in how attractive Bitcoin is as an investment. When interest rates are low (meaning you don't earn much money by saving in a bank) or the stock market is unpredictable, Bitcoin might seem like a safer option to some people. It's different from traditional investments because it doesn't directly depend on the usual economic factors like how well the economy is doing or what central banks are doing. 

After the recent global economic downturn, Bitcoin has shown it can do well even when other investments are struggling, making more people and even big investors notice. Bitcoin is becoming a common choice for diversifying investment portfolios, especially in uncertain financial times.

Global Perspectives

The 2024 Bitcoin halving will receive different reactions from different parts of the world, depending on local economic conditions and rules about cryptocurrencies. In places where the economy is not doing well, with high inflation or a falling local currency value, people might see the halving as good news for Bitcoin. 

They might want to use Bitcoin as a safe place to keep their money or a new way to buy and sell things, especially if their government is open to cryptocurrencies.

On the other hand, in places with strict rules about cryptocurrencies or where the traditional banking system is strong and stable, people might not get too excited about the Bitcoin halving. Tough regulations could make it harder for people to get into Bitcoin, making it less appealing. Also, in countries with strong economies and stable currencies, there might be less reason for people to switch to Bitcoin for better returns or as a safe haven.

Stephen Wundke, Global Business Development Director at Algoz, said, "There is no doubt countries that have started to provide a better-regulated framework for Cryptocurrency will lead the world in gaining traditional finance adoption."

Wundke continued, saying, "Singapore, Hong Kong and Europe lead the way with regulation and are already enjoying mainstream adoption. The US, while addressing the ETF's, went some way towards creating a better environment but there is still a strong fear of the SEC and its attitude towards crypto. Missing the opportunity, in the US, presented by the halving would be a great shame."

Emerging markets, or countries with fast-growing economies, are expected to be especially important for Bitcoin around the halving time. These countries often have young people who like trying new technology and might not have easy access to traditional banking, making Bitcoin an attractive option. 

The halving could lead to more people and investors in these countries getting interested in Bitcoin, which could help increase its value and importance worldwide. The interest from these emerging markets could be a key factor in how the Bitcoin halving affects the global cryptocurrency scene, showing how connected the world of cryptocurrencies is.

Conclusion

Knowing global economic trends, like during the Bitcoin halving, is important for cryptocurrency users. Economic changes, regulations, and investor behavior can make the market unpredictable. By keeping up with what's happening, investors can handle challenges, avoid risks, and find chances for success in cryptocurrency.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.