Experts Discuss Halving’s Impact on Altcoins

Altcoins will respond differently to the reduction in rewards for Bitcoin miners, influenced by factors such as tokenomics, value proposition, and their overall contribution to decentralization. This was stated by several experts in a conversation with Cointelegraph.

Preparing for the Event

Historically, Bitcoin experiences exponential growth following a halving, which subsequently affects the entire cryptocurrency market.

Over the past year, digital gold has increased by 110%, and investors anticipate the rally to continue. This is indicated by the cryptocurrency fear and greed index, which at the time of writing stands at 65. 

The BNB Chain development team stated that “halving is known for its impact on market sentiment within the Web3 ecosystem.” According to them, projects with a solid foundation and innovative technologies attract more investor attention during this period. 

“From our side, we see more initiatives aimed at fostering ecosystem growth and innovation,” the team added.

Mo Shaikh, co-founder and CEO of Aptos Labs, noted the growing interest in Web3 amid the halving of block rewards. 

Stefan Kimmel, CEO of the M2 cryptocurrency exchange, emphasized the need for “proper updates” for projects aligning with the halving narrative. 

“Looking at the bigger picture, the halving draws attention, but we understand it’s just part of a broader story. The emergence of ETFs, quantitative easing, and the halving will shape the future contours of the market,” he believes. 

Altcoin Movements

BNB Chain noted the correlation between Bitcoin’s halving and the rise of altcoins. The reduction in rewards and changes in the difficulty of mining the first cryptocurrency indirectly affect the profitability of mining other coins, influencing market participants’ behavior and prices.

Investors seeking higher returns often redistribute some of their Bitcoins into various altcoins after a halving, experts highlighted.

Meanwhile, projects themselves strive to increase the amount of the first cryptocurrency in their asset backing to minimize volatility.

“Altcoins with strong use cases, supportive communities, and promising growth prospects can attract a portion of Bitcoin reserves, enhancing liquidity and trading volume within the ecosystem,” explained BNB Chain representatives. 

Despite market activity during a halving, the event sometimes creates challenges that divide altcoin ecosystems. 

Differences in economic incentives for miners, stakers, and other network participants, combined with community disagreements, often lead to soft forks and hard forks. 

If Core doesn’t accept your code, fork Core and get people to run your fork. For instance, I just released Libre Relay on top of Bitcoin Core v27.0rc1:https://t.co/id22qRZMUG

Of course, I have a much easier time doing this because I’m not trying to censor anyone… https://t.co/jx5p9mdnMx pic.twitter.com/bI4AL2Lsen

— Peter Todd/mempoolfullrbf=1 (@peterktodd) April 11, 2024

“If the [Bitcoin Core team] doesn’t accept your code, create a fork and ask people to run it. For example, I just released Libre Relay on top of Bitcoin Core v27.0rc1,” wrote Bitcoin developer Peter Todd. 

These changes can create new cryptocurrencies with modified protocols designed to meet the needs and preferences of specific factions within the community. 

However, such decisions are not always successful. The Ethereum Classic (ETC) hard fork with a Proof-of-Work consensus mechanism shows relatively weak performance. According to CoinGecko, ETC has only grown by 19% over the past year. 

Back in March, Bitfinex analysts highlighted the strength of altcoins and the weakness of Ethereum.