- Bitcoin halving reduces issuance rates and attracts new market participants.
- The upcoming event will occur after reaching a historical high.
- Halving will take place amid a steady inflow of funds into ETFs and a surge in L2 and DeFi activity.
The forthcoming halving in April 2024 will occur under unprecedented conditions. Analysts at Binance have examined its impact on the industry and the consequences beyond price fluctuations.
The programmed reduction in miner rewards by half every four years decreases the rate of new coin creation. Halving plays a crucial role in shaping tokenomics, enhancing the deflationary nature and supporting the value of bitcoin.
A key consequence of the event is the change in the valuation and market capitalization of the leading cryptocurrency. The principle of scarcity due to limited issuance underpins this. As supply gradually decreases and demand grows, conditions are created for future price increases.
Typically, bitcoin’s price significantly rises within five to six months after each halving. For instance, in 2012, 2016, and 2020, the increase 150 days post-event was 999%, 15%, and 24%, respectively. Meanwhile, between halvings, valuations reached ATH.
The 2024 Halving Peculiarity
The uniqueness of the upcoming April event lies in the fact that, for the first time in history, bitcoin reached a new record level before the reduction in miner rewards. Analysts were uncertain whether this was a prelude to new highs post-halving or if the price had already reached a cyclical peak.
According to experts, the advantages of bitcoin’s algorithmic monetary policy and deflationary properties attract interest from outside the crypto space, drawing new participants to the market.
The increased recognition of digital gold before and after halving encourages newcomers to explore and purchase the asset, expanding its audience.
The halving of rewards also raises complex questions regarding the network from miners’ perspectives, particularly concerning its security, transaction fees, and scalability.
Halving reduces miners’ income, accelerating the consolidation of mining operations and pools. Each event increases the need for efficiency and innovation, enhancing network performance and its appeal to a broader audience.
User Base Dynamics
Analysts proposed the dynamics of active addresses as an indicator of adoption. On the 150th day after each previous halving, the metric increased: by 83% in 2012, by 101% in 2016, and by 11% in 2020.
The number of wallets with a balance of $100 (approximately matching the profile of retail investors) increased by 12% in 2012, by 6% in 2016, and remained roughly the same in 2020.
Institutional interest in digital gold typically grows during halving periods. As institutional capital flows in, infrastructure and products emerge, laying the foundation for the widespread adoption of digital assets.
The number of wallets holding more than $1 million (matching the profile of institutional investors) increased by thousands of percent in 2012, by 10% in 2016, and by 43% in 2020.
Additional Drivers
The upcoming bitcoin halving will occur amid a steady inflow of funds and growing involvement of TradFi following the approval of spot bitcoin ETFs in the US. This is complemented by a surge in L2 and DeFi activity, enhancing the network’s practical value. Such a situation appears highly favorable for the digital gold ecosystem and the entire crypto space, experts highlighted.
They noted that there are no guarantees this halving will proceed like previous ones, despite the favorable context of 2024.
Each event represents a distinct stage in bitcoin’s evolution, influenced by changing market conditions, technological advancements, and regulatory changes. Despite the optimism, it is important to remember the unpredictability of the digital asset market, Binance added.
Earlier, CoinGecko analyzed the behavior of the leading cryptocurrency after each halving of miner rewards.
Back in April, in honor of bitcoin’s halving, the ForkLog team will organize the AllTimeHalf 2024 forum with developers, entrepreneurs, enthusiasts, and visionaries.