Could the significant rise of Bitcoin start this year? That’s the question on the minds of cryptocurrency traders ahead of the upcoming Bitcoin “halving.”
First, let me explain what halving means. It’s a reduction in the rate at which new bitcoins are created during mining. This reduction halves the amount of Bitcoin available as rewards for miners, making mining less profitable and slowing down the production of new coins. Some Bitcoin enthusiasts argue that this enhanced scarcity gives Bitcoin additional value.
Previous Bitcoin halvings in 2012, 2016, and 2020 were followed by massive price increases. For example, after the May 2020 halving, Bitcoin surged by over 545%. The next halving is currently scheduled for April 20, according to the CoinGecko data platform. However, this time, the market is divided on whether Bitcoin could see another rapid increase.
This current cycle differs from all previous ones, as Bitcoin has already reached an all-time high even before the halving. This behavior can be interpreted as bullish, but it also presents a level of uncertainty in market dynamics. Some analysts suggest that the impact of halving may already have been priced into Bitcoin’s recent movements. Bitcoin reached its all-time high in March at $73,803.25, rising by over 60% since January 1, as investors anticipated new institutional money entering the asset class via Exchange-Traded Funds (ETFs).
Halving occurs approximately every four years, although some analysts argue that it’s challenging to rely solely on historical precedent. They suggest that a variety of factors outside of halving could have contributed to Bitcoin’s rise in 2020, including more flexible monetary policies and retail investors spending surplus funds on cryptocurrencies. Researchers at cryptocurrency analytics firm Kaiko stated in a memo, “The sample size of three [halvings] may not necessarily be large enough to be conclusive.”
