Bitcoin Halving 2024: The Impact on Miners, Market and Institutional Interest
Summary:
The article discusses the upcoming 'halving' event of Bitcoin (BTC) set for April 2024, which reduces Bitcoin miners' block rewards by half. The effects of this event remain uncertain, but with the new spot Bitcoin Exchange-Traded Funds (ETFs) introduced in January, Bitcoin's price has significantly increased. Experts predict the continuing impact of ETFs and a reduction in the new Bitcoin issuance will likely drive Bitcoin's price even higher and boost institutional interest. However, while larger and public-held mining firms might find advantages in the changing market, smaller miners could face challenges. The halving event displays Bitcoin’s unique features and resilience, reinforcing its standing as a potentially long-lasting man-made currency.
There's still a lot to learn about Bitcoin's (BTC) four-yearly 'halving' event which reduces Bitcoin miners' block rewards by half. We're unsure how the miners will react or predict how the network's hash rate will be affected. There's also speculation about how Bitcoin's price will fluctuate or if this will lead to increased cryptocurrency usage. However, we know that every four years, miners' rewards are halved due to a pre-set rule in the network. Around April 2024, once the 210,000th block has been verified, miners' rewards will drop from 6.25 BTC per block to 3.125. This halving could be unique due to the introduction of new spot market Bitcoin exchange-traded funds (ETFs) in January. These have significantly increased Bitcoin's price and brought the entire crypto sector closer to a $3 trillion market value.
This brings up another question: will the April halving encourage this trend considering that Bitcoin ETFs have led to institutions considering Bitcoin as an alternative asset? Dante Cook from Swan Bitcoin and Ethan Vera from Luxor Technology Corporation believe that institutional interest will continue to grow. They see the drop in block reward as inviting for institutions who are looking to purchase the coin, as Joe Nardini from B. Riley Securities points out that it’s more evidence that the BTC supply won’t inflate excessively; a positive aspect for many would-be institutional investors. However, not everyone thinks that the halving on its own will coax large corporations or finance institutions into investing in Bitcoin.
The impact of the halving has started to change, as explained by Taras Kulyk from SunnySide Digital, who says that the industry has prepared for the reduced economics and the growth of L2 technologies on top of the Bitcoin Network has diminished the halving's effect as it increases transaction fees. Bitcoin's price has historically risen in the months before a halving, like it is now for the 2024 event. However, as the director of research at Fidelity Digital Assets, Chris Kuiper explains, we can't say for certain if the price surge is due to the halving or the approval of spot market Bitcoin ETFs.
The overall computing power or hash rate, which makes the Bitcoin network more secure, has historically fallen but recovered relatively quickly after past halvings (2020, 2016, and 2012). What's different now from previous halvings are the new ETFs that have significantly changed the Bitcoin ecosystem by causing extreme demand for Bitcoin's limited supply. This demand could push prices even higher and lessen the market struggles that miners have traditionally faced. After the halving, there will be 50% less Bitcoin available for sale, while ETF demand remains high, leading to continued instability.
In the long run, the hash rate is expected to recover and Bitcoin's price to continue its upward trend. The halving aspect where the block reward periodically decreases is unique. Historically, the decrease in new Bitcoin issuance has positively impacted the price. But what will happen to traditional BTC proxies like MicroStrategy and some of the larger BTC mining firms after the 2024 Bitcoin halving settles? Some say that the halving will mainly affect BTC supply, while the ETFs and well-publicized purchases by MicroStrategy affect the demand side.
Miners' prospects are affected most directly by the halving. While the global BTC mining sector is generally more sustainable and larger than in past years, some miners may struggle unless the market price continues to rise. The mining sector's level of debt seems lower overall, and they seem to have better control over cost factors such as electricity, but it will be hard for smaller miners. On the other hand, many miners are now seeking additional revenue opportunities and are looking into the ecosystem of applications built on Bitcoin.
Comparing the halving in April to the introduction of spot Bitcoin ETFs in January, most say that the new ETFs are more important. However, halvings are unique to Bitcoin and serve as a kind of advertisement for the good, lasting qualities of the cryptocurrency, and the potential risks involved, such as falling hash rate. The consistent performance of Bitcoin's "monetary policy" reinforces the notion that Bitcoin is a growing asset that is becoming increasingly scarce in comparison to other financial assets, commodities, or currencies. These features point out that Bitcoin could be the first man-made currency to survive for more than 200 years.
Published At
3/13/2024 5:20:37 PM
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