Hannah Lang
(Reuters) – Could Bitcoin’s meteoric rally begin this year?
That’s the question on the minds of cryptocurrency traders ahead of the upcoming Bitcoin halving, a change in the blockchain technology behind the token that is intended to slow the rate at which new Bitcoins are created.
Previous Bitcoin halvings in 2012, 2016 and 2020 were followed by massive increases in its price, with Bitcoin up more than 545% a year after the May 2020 Bitcoin halving.
The next cut is currently scheduled for April 20, according to data platform CoinGecko. But this time, the market is divided on whether Bitcoin is headed for another meteoric rise.
With halving, the amount of Bitcoin available as a reward to miners is cut in half, making mining less profitable and slowing down the production of new tokens. Some Bitcoin enthusiasts say the increased scarcity of Bitcoin gives it added value.
In a report dated April 8, Bitfinex analysts predicted that the price of Bitcoin would rise by about 160% within 12 to 14 months following this year’s halving, which they said could push Bitcoin to an all-time high of more than $150,000.
“This current cycle stands out from all other previous cycles as the price of Bitcoin has already reached a new all-time high – even before the halving. This anomaly can be interpreted as a bullish indicator, but it also introduces a certain level of uncertainty into market dynamics,” the report said.
David Mercer (NASDAQ:), CEO of LMAX Group, which operates an institutional cryptocurrency exchange, is among the skeptics: “The view from the adult market is that in 2012, 2016, 2020, the halving preceded a massive bull run, so the evangelist will tell you, that in 2024 it will be the same. We think not.”
Cause? Some analysts say the impact of the halving may already have been factored into Bitcoin’s recent upward move. hit a record high in March at $73,803.25 and is up more than 60% since Jan. 1 as investors welcomed new spot bitcoin exchange-traded funds (ETFs) in the U.S. and bet on new institutional money entering the asset class.
Bitcoin ETFs “brought massive interest and net new flows into Bitcoin leading up to the halving event, whereas in the past we have seen price levels immediately following a halving event bring in those new flows,” said Thomas Perfumo, head of strategy at crypto exchange Kraken .
PRICE?
Halvings occur approximately every four years, although some analysts say it is difficult to rely on historical precedent. They say a combination of factors beyond the halving may have contributed to Bitcoin’s rally in 2020, including looser monetary policy and stay-at-home retail investors spending spare cash on cryptocurrencies.
“Sample size three [halvings] not necessarily large enough to be definitive. It is also important to note that other bullish developments in the industry contributed to this rise,” researchers at cryptanalytic firm Kaiko said in a note.
However, others say ETFs could be just one of a series of catalysts that could support Bitcoin’s price next year following its halving. The US Federal Reserve is expected to cut interest rates this year, which could boost risk assets such as cryptocurrencies.
“You have a simultaneous influx of new money into the asset class, finally through ETFs… as well as the Fed, indicating that they plan to ease monetary policy later this year,” said Ravi Doshi, head of markets. at FalconX, a prime cryptocurrency broker.
“Assuming that the traces of inflation continue to be muted, you have a recipe for significant price increases.”