Bitcoin’s quadrennial halving event, which cuts miners’ block rewards in half, is approaching in April 2024. While many uncertainties surround the event, such as the impact on miners and the price of Bitcoin, one thing is certain: the block rewards will be reduced from 6.25 BTC per block to 3.125 BTC. This year’s halving could be unique due to the introduction of spot market Bitcoin exchange-traded funds (ETFs), which have driven the price of Bitcoin to all-time highs and increased the overall market capitalization of the crypto sector. Some believe that the ETFs have opened institutions’ eyes to Bitcoin and may accelerate adoption after the halving. However, not everyone agrees, and some argue that the halving alone will not lead to increased institutional investment. The halving event itself may not be as significant as before, as the industry is well-prepared and the growth of Layer 2 technologies has blunted the impact of the halving. Historically, Bitcoin’s price has risen in the months leading up to a halving, and this trend is expected to continue in 2024. However, it is unclear whether the price surge is a result of the halving or the ETF approvals. Some analysts warn that the price of Bitcoin could drop after the halving, but history suggests that the hash rate, which measures the network’s computing power, will recover. The introduction of ETFs has created a demand shock for Bitcoin’s limited supply, which could drive prices higher and benefit miners. Traditional Bitcoin proxies like MicroStrategy may be more influenced by the ETFs than the halving itself. The mining sector has matured since the last halving, but smaller miners may struggle unless the price of Bitcoin continues to rise. Many miners are looking for supplemental revenue opportunities, such as transaction fees, and are investing in the development of the Bitcoin ecosystem. While ETFs may have a greater immediate impact, halvings are unique to Bitcoin and reinforce its monetary policy and scarcity as an asset. Ultimately, the halving event serves as a reminder of what makes Bitcoin enduring and could contribute to its long-term survival.
Could the Bitcoin halving attract a surge of institutional investors to the world of cryptocurrency?