Izmagilov
Bitcoin (BTC-USD) is set to experience its fourth halving in April, one of the most anticipated events of 2024 in the crypto space. Halving is a process in which Bitcoin mining is halved, reducing the number of new Bitcoins issued the market.
The policy was introduced to ensure that BTC remains scarce. According to the Blockchain Council, around 2 million Bitcoins still need to be mined. By 2023, approximately 19 million have been mined, with the maximum supply capped at 21 million.
Investors have often targeted the period leading up to the next Bitcoin halving to acquire more Bitcoins in anticipation of a post-halving recovery.
Statistically speaking, the price of Bitcoin increased significantly against the US dollar after each of the three previous halvings. In the six months following the first halving in 2012, BTC/USD price increased by 950%, jumping from $12 to $126.
After the second halving in 2016, the price rose from $654 to $1,000 in seven months, while in 2020 it shot from $8,570 to $18,040 within a similar period.
In each of the three previous halvings, there were other potential catalysts for the price rally.
When the first Bitcoin halving occurred in November 2012, it followed the launch of Litecoin in October 2011 and Peercoin in August 2012. The two launches signaled growing momentum in cryptocurrency adoption, which, along with Bitcoin's increased rarity, may have led to this contributed to the sharp rise in the BTC/USD price.
At the 2016 halving, Ethereum had only launched the previous year, opening up a new perspective for cryptocurrencies. Now developers could build their own apps on the blockchain, further diversifying crypto's use cases. This was also the time when Initial Coin Offerings (ICOS) became increasingly popular and almost anyone who wanted to seek opportunities in the industry could easily raise funds for their projects.
With the halving in 2020, the blockchain industry began to enter the mainstream through decentralized finance, blockchain gaming, and non-fungible tokens, which may also have driven up the BTC price.
We are witnessing a similar turn of events, with recent spot Bitcoin ETFs potentially acting as a price boost for the fourth post-halving rally.
An argument for buying Bitcoin before the April halving
Bitcoin price is up 17.65% this year, fueled by the boost from SEC spot Bitcoin ETF approvals. This SEC decision opened up an important opportunity for traditional investors to invest in Bitcoin without creating a cryptocurrency wallet.
One of the biggest barriers to entering the crypto industry is the complicated features that users must familiarize themselves with before investing. Although some companies are trying to simplify the process using crypto on-ramps (which allow people to buy cryptocurrencies with fiat currency), the process is still not as seamless as depositing money into a mobile wallet.
By allowing traditional investment banks to offer spot Bitcoin ETFs, non-crypto-native investors can invest in the world's most popular cryptocurrency as if they were buying shares of another ETF.
This paves the way for more capital to flow into Bitcoin, further increasing demand. According to a report from Barron's, BlackRock's iShares Bitcoin Trust has already raised more than $5.2 billion since its debut, while the Fidelity Wise Origin Bitcoin Fund has surpassed $3 billion. These numbers represent just two of the 13 spot Bitcoin ETFs approved in January 2024.
However, this is not the only catalyst that is likely to drive Bitcoin price higher in the coming months. I reached out to some experts in the crypto space to find out how important the Bitcoin halving and spot ETF approvals could be for the BTC/USD price.
Saul (Shauli) Rejwan, founder and managing partner of Masterkey VC, believes that the ETF approvals represent an important step towards regulatory approval and legitimacy for the crypto sector.
“Bitcoin ETFs show that traders and institutional investors are interested in investing funds in Bitcoin using traditional trading and investment methods. Demand has exceeded expectations, with over $10 billion pumped into the market last month alone,” said Rejwan.
Brandon Dallmann, co-founder of blockchain advisory and advisory firm RoundTable21, also believes that the ETF approvals have overcome the final obstacles that stood in the way of Bitcoin's adoption as a global reserve asset.
But more than that, he believes that the halving comes at a time when the Bitcoin mining network does not need to rely on energy and global power grids.
“We are already seeing pioneering energy companies entering into mining contracts to improve the efficiency of power grids, reduce energy waste and use it for economic benefit.”
According to Dallmann, if used strategically, Bitcoin infrastructure “can be used to tactically expand and strengthen energy utilities worldwide, giving nations that use it a strategic computing advantage over those that do not.” Opportunity has never been used for another halving in Bitcoin history.”
One of the biggest criticisms of Bitcoin is the power required to mine a Bitcoin. In 2021, The New York Times estimated the number at about 155,000 kWh, equivalent to more than 14 years of electricity for an average U.S. household. This fact has discouraged some segments of the population, especially those concerned about climate change, from investing in Bitcoin.
However, as companies find new ways to use Bitcoin mining to optimize the economic value of the electricity they generate, it could serve as another catalyst for a post-halving BTC price rally.
Recently, the Bitcoin ecosystem has also emerged as one of the fastest-growing blockchains for decentralized applications (dApps), following in the footsteps of popular dApp networks such as Ethereum and Solana.
The Bitcoin blockchain is now more than just a cryptocurrency, expanding BTC's use cases. This is the first Bitcoin halving after a significant development of the Bitcoin network.
Technically, BTC/USD also appears poised to extend the current rally after hitting a new 27-month high of $52,265 on Tuesday.
Trading view
Bitcoin price recently made an upward breakout from an ascending channel formation, indicating an acceleration in bullish momentum. Additionally, Bitcoin has now entered an overbought state on the 14-day RSI, further supporting the bullish bias.
The price of the pioneer cryptocurrency is also enjoying support away from the 100-day moving average line that sparked the recent rise.
The next key resistance zone is around the $60,000 level, which if broken could pave the way for a rally that could take BTC/USD to a new all-time high.
The $40,000 level, which previously acted as a supply zone, is now emerging as a strong demand zone that investors could target as a potential zone to purchase more Bitcoin should a major decline occur.
An argument for not buying Bitcoin before the halving
Although Bitcoin is quickly emerging as a potential reserve currency, cryptocurrencies still represent a relatively small asset class compared to other popular investment vehicles.
“Total digital assets traded are worth around $2 trillion, compared to derivatives markets of over $250 trillion, gold of around $10 trillion, and bonds and stocks of over $100 trillion,” said Rejwan. This makes Bitcoin a relatively risky asset, comparable to these asset classes.
Additionally, the recently launched spot Bitcoin ETFs may have a recency bias that could lessen over time, limiting their potential impact on Bitcoin price.
While the last three times the halving has shown that it can boost BTC price, things could be different this time.
First, investors are now smarter and would have bought Bitcoin months before the halving. The recent rise in BTC/USD may support this case, suggesting that the expected post-halving rally may already be priced in.
Second, Bitcoin experiences regular setbacks after every major rally. Since falling below $20,000 in January 2023, Bitcoin has risen more than 200%. And since March of that year, it has not declined by more than 15% without recovering.
Therefore, the BTC/USD pair could still experience a sharp decline of around 23%, which could see it retest the $40,000 level, which is now a key demand zone.
Diploma
Overall, there are several catalysts for an ongoing BTC bull run. The opportunity created by the approval of spot Bitcoin ETFs, coupled with the emergence of the Bitcoin network as a dApp ecosystem, makes Bitcoin a more interesting cryptocurrency ahead of its fourth halving.
Technical analysis also supports a continuation of current gains, with a level of $60,000 potentially providing a signal as to how far this rally could go.
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