• Bitcoin’s halving, an event that reduces the asset’s inflation rate roughly once every four years, is expected to occur in April 2024.
• Many believe its scarcity will drive up its price, as it has done after previous halvings in 2012, 2016 and 2020.
• Some analysts however are skeptical that the 2024 halving will have a similar impact by 2025, citing macroeconomic factors as having more of an influence on Bitcoin’s price.
Bitcoin Halving: Analyzing the Effects on Price and Market Sentiment
Overview
Bitcoin is set to undergo another “halving” event which will reduce the asset’s inflation rate roughly once every four years. At Block 840,000 (expected to occur on April 26 2024), the number of Bitcoin (BTC) produced every ten minutes will fall from 6.25 BTC to 3.125 BTC. Many anticipate the event to have bullish implications for the asset’s price – but is this true? We analyze here how bitcoin halvings affect prices and market sentiment.
Supply and Demand Theory
The relationship between supply and demand dictates any asset’s price – when there is scarcity and/or great desire for an item its price rises; conversely if there is abundance with little money chasing it then prices decrease. It follows that when a Bitcoin halving occurs, given that it decreases available supply, its price should theoretically appreciate as a reactionto its record scarcity. History appears to support this theory – following previous Halvings in 2012, 2016 and 2020 Bitcoin experienced parabolic bull runs to new all-time highs in late 2013, 2017 and 2021 respectively.
Are Halvings Really Responsible for Bull Runs?
Not everyone believes that Halvings are solely responsible for these runs; Coinbase analysts published a report claiming that outside of the third halving evidence supporting this claim was not clear cut – instead attributing them to coincidental macroeconomic factors rather than just Halvings themselves. CryptoQuant’s Head of Marketing Hochan Chung also believes effect of bitcoin halvings on its price will likely decrease over time due to decreasing new supply limits
What Do Institutions Believe About 2025?
Despite some skepticism many institutions appear bullish about 2025 already placing investments in anticipation of new highs being reached for bitcoin following the upcoming Halving in April 2024 .
Conclusion
Overall while there is much anticipation surrounding this upcoming event history suggests what effect it may have remain complex; while many believe it could lead us into another bull run others attribute much more influence other macroeconomic factors such as investors confidence or institutional backing .
