On hold for halving By Reuters

Hannah Lang

(Reuters) – Could Bitcoin’s bumper rally start this year?

This is a question on the minds of cryptocurrency traders ahead of the upcoming Bitcoin ‘halving’, a change in the token’s underlying blockchain technology designed to reduce the rate at which new Bitcoins are created.

Previous Bitcoin halvings in 2012, 2016, and 2020 were followed by massive price increases. One year after the Bitcoin halving in May 2020, Bitcoin is up more than 545%.

The next halving is currently scheduled to occur on April 20, according to data platform CoinGecko. But this time, the market is divided on whether Bitcoin can have another sharp rally.

Halving will halve the amount of Bitcoin rewarded to miners, making mining less profitable and slowing down the production of new tokens. Some Bitcoin enthusiasts say Bitcoin’s increased scarcity gives it additional value.

In an April 8 report, Bitfinex analysts predicted that the price of Bitcoin would surge about 160% in the 12 to 14 months following this year’s halving, which would push the price to an all-time high above $150,000. He said he could soar.

“This cycle stands out from all other previous cycles because the Bitcoin price has already hit all-time highs even before the halving. This anomaly can be interpreted as a bullish indicator, but it also gives Bitcoin price some stability. brings uncertainty to market dynamics,” the report said.

David Mercer (NASDAQ:), CEO of LMAX Group, which operates institutional cryptocurrency exchanges, is one of the sceptics. So the evangelist will say that will not be the case in 2024.”

reason? Some analysts say the impact of the halving may already be reflected in Bitcoin’s recent rally. It hit a record high of $73,803.25 in March and is up more than 60% since January 1 as investors cheered a new U.S. cash Bitcoin exchange-traded fund (ETF) and bet on new institutional funds entering the asset class. .

The Bitcoin ETF “brought tremendous interest and net new flows to Bitcoin prior to the halving, but in the past we have seen price levels immediately following a halving event drive these new flows,” said CEO Thomas Perfumo. Strategy of cryptocurrency exchange Kraken.

Is there a price?

Halvings occur approximately every four years, but it is difficult to rely on historical precedent, according to some analysts. They say a combination of factors other than the halving, including loose monetary policy and at-home retail investors spending their spare cash on the cryptocurrency, may have contributed to Bitcoin’s rally in 2020.

“A sample size of 3 (halving) is not necessarily large enough to draw conclusions. It is also important to note that other bullish events in the industry have contributed to the rise,” researchers at cryptocurrency analytics firm Kaiko said in a note. .

Still, others say the ETF could be one of a series of catalysts that could support Bitcoin prices in the year following the halving. The US Federal Reserve is widely expected to cut interest rates this year, which could boost risk assets such as cryptocurrencies.

“Finally, we are seeing simultaneous inflows of new money into the asset class through ETFs, as well as the Federal Reserve, which indicates that the Fed plans to ease monetary policy later this year,” said Ravi Doshi, head of markets. From FalconX, a cryptocurrency prime broker.

“Assuming the inflation print continues to remain silent, there is a way to get much higher prices.”