At the beginning of 2024, there was a euphoria as a large number of analysts assured the world that Bitcoin would soon be worth hundreds of thousands, or even millions of dollars. The most optimistic forecasts sounded, but as a result, we see that the first cryptocurrency has only recently begun to grow, trying to go beyond narrow limits.
The reason for such optimism was Bitcoin's halving, a programmed 2x reduction in miners' rewards that occurs every four years. The halving has affected the value of Bitcoin and the state of the cryptocurrency market every time.
This time, however, digital gold is slow to increase, making every Bitcoin investor doubt they will become many times richer. In this article, we attempt to understand the reasons for this and tell you how the market behaves after halving.
Historical Context of Bitcoin Halving
- 2012 halving: the reward for miners per block dropped from an impressive 50 BTC to only 25 BTC. A year after that, the price of Bitcoin rose from $11 to $1152.
- 2016 halving: the reward was reduced from 25 BTC to 12.5 BTC, and the price of the main cryptocurrency rose from $664 to $17,760 within a year and a half.`
- 2020 halving: miners' reward dropped to 6.25 BTC while making the price rise from $9734 to $68,000 within a year and a half.
It is believed that Bitcoin’s price after halving should rise after halving. When the price of Bitcoin goes up – the crypto market usually follows it and everything sounds so simple, especially when we look at history from today's perspective.
After the first halving, Bitcoin went up by 1000%, and after the second halving, it went up by 200%. The 2020 halving (+600%) caused a real wave in the digital world, but it was the result of a chain of events and did not happen overnight.
Expert opinions on 2024 Bitcoin halving
J. P. Morgan analysts hypothesized that after halving in April 2024, the Bitcoin rate will fall dramatically - up to 42 thousand dollars. Now one bitcoin is worth more than 64 thousand dollars. The cryptocurrency mining profitability depends strongly on its price as you need expensive computers and a huge amount of electricity.
After halving in April 2024 Bitcoin was traded between $26,000 and $28,000 from August to November 2023. The April 20 cut in block reward led to a decrease in cryptocurrency mining. In May and June, miners were unable to recover their Bitcoin production. In the following months, miners' transactional revenues decreased significantly, reaching $24.9 million in July against the $926.2 million received as subsidies per mined block.
According to calculations by experts at J. P. Morgan, the cost of Bitcoin mining is 26.5 thousand dollars. Such a decrease in the profitability of mining will lead to a sharp reduction in the number of miners.
J. P. Morgan analysts assume the departure of some miners after halving will lead to a 20% drop in the hash rate. These dynamics correlate with the formation of the Bitcoin value: the higher the hash rate, the more people are confident in Bitcoin. At the same time, the lower the hash rate, the more likely Bitcoin is to fall hard.
Factors that might influence the next Bitcoin bull run
- On April 20, 2024, a BTC halving took place. Usually after the halving, the crypto market started to grow. The slow price rise always ended with parabolic growth.
- Spot ETFs on Bitcoin and Ethereum started trading on stock exchanges. Large investment companies started to add these assets to their portfolios. For example, BlackRock, the largest international investment company, already has 325,449 BTC (≈ $30.1 billion) on its balance sheet.
- SEC pressure is waning, court cases have been going on for years, and the regulator has begun to relent. First, it was XRP and a little later Grayscale. Even former Binance CEO Changpeng Zhao, who will pay a fine and "serve" a small (relatively) prison term of 4 months, had to come to a settlement.
- U.S. macroeconomic data such as labor market data, inflation data, the U.S. Federal Reserve's rate decision, and GDP data - could boost cryptocurrency prices.
Strategies for investors
As we stated previously, the Bitcoin halvings are usually followed by bull runs. During the bull run, the best strategy is always to hold Bitcoin and consistently buy more regardless of local price fluctuations.
Another strategy is to trade on volatility, where traders profit from price fluctuations during and after the halving period. This strategy requires skill and experience but can be lucrative. Investing in altcoins is also a viable strategy as their prices tend to rise faster than Bitcoin's during halving. Before choosing a strategy, an investor should always estimate risks and do research before buying any crypto asset.
Conclusion
Previous cycles showed that Bitcoin also tends to move sideways in the first months after halving, which is also observed now - from April to August 2024. The overall growth from local lows between halving cycles is also still not comparable to the observed growth of this period, which gives analysts reason to talk about the continuation of the global movement.
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