Bitcoin Halving: Analyzing the Effects on Price and Market Sentiment
Bitcoin’s next “halving,” an event that reduces the asset’s inflation rate roughly once every four years, is now only 9 months away.
At Block 840,000 (which is 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. For many Bitcoin holders, the event is expected to have bullish implications for the asset’s price, alongside other factors.
Dennis Porter, CEO of the Satoshi Act Fund, predicted on Wednesday that the upcoming halving will help spark “the largest parabolic upward move in Bitcoin’s history.”
Like any other asset, Bitcoin’s price is dictated by the laws of supply and demand. When an asset is scarce and/or greatly desirable, its price rises. Likewise, when an asset is plentiful but has little money chasing it, its price falls.
Theoretically, when a Bitcoin halving occurs, the number of BTC available on the market decreases. As this effect compounds over time, Bitcoin’s price theoretically appreciates as a reaction to its record scarcity.
At a glance, history appears to prove that theory. Following Bitcoin halving events in 2012, 2016, and 2020, Bitcoin has experienced parabolic bull runs to new all-time highs in late 2013, 2017, and 2021 respectively.
Some analysts are skeptical that the 2024 halving will have a similar impact by 2025, however. According to CryptoQuant’s Head of Marketing Hochan Chung, the effect of Bitcoin halvings on the asset’s price will likely decrease over time as the “new supply limit decreases significantly.”
In fact, Coinbase analysts published a report last month suggesting that bull markets following previous halvings may have been spurred by coincidental macroeconomic factors, rather than the halving itself. It stated:
“Outside of the third halving, evidence that these halving events supported bitcoin price action is not entirely clear cut.”
Nevertheless, many institutions already appear bullish on 2025 and are placing money on Bitcoin reaching new highs. Bitcoin mining companies including Riot, CleanSpark, and Iris Energy have all made major infrastructure investments this year in explicit preparation for the 2024 halving.
Meanwhile, Standard Chartered Bank analysts recently called for Bitcoin to reach $120,000 per coin by 2025, spurred by miners hoarding their coins during the bull cycle and sucking supply off the market. Rich Dad Poor Dad author Robert Kiyosaki currently has the same price target
Retail investors have also begun to HODL. On-chain data shows that “shrimps”, Bitcoin addresses holding less than 1 coin, are alone accumulating over 33,000 BTC per month – more than that created by all miners.