Bitcoin’s highly anticipated halving event concluded on April 20, reducing the block mining reward from 6.25 BTC to 3.125 BTC. This is the fourth time Bitcoin has undergone a halving, and previous events have been followed by significant price surges. After the 2012 halving, Bitcoin’s value increased by an impressive 9,500%, and the 2016 halving saw a 3,000% increase over the following year. However, the price rally following the 2020 halving was more modest, with Bitcoin’s value rising by only 650%.
Leading up to the halving, Bitcoin experienced a 110% price increase amid significant volatility. In the week before the halving, Bitcoin’s value dropped 17% from $72,000 to $60,000. After the halving, Bitcoin’s price continued to fluctuate, reaching a high of $67,000 on April 24 and then dropping back to $62,500 just 72 hours later.
The volatility surrounding the halving has led some experts to advise caution. Bitwise, an asset management company, suggested that the halving was a “sell the news” event, and analysts from JPMorgan and Deutsche Bank projected that BTC could reach as low as $42,000 in the coming weeks.
Despite the volatility, spot Bitcoin exchange-traded funds (ETFs) in the United States have seen significant growth since their launch in January 2024. BlackRock’s iShares Bitcoin Trust (IBIT) had a streak of 71 consecutive days of daily inflows, accumulating nearly $15.5 billion in assets before recording zero net inflows on April 24. Other Bitcoin ETFs, such as Fidelity’s Wise Origin Bitcoin Fund and ARK Invest’s ARK 21Shares Bitcoin ETF, have also attracted decent inflows. In total, U.S. spot Bitcoin ETFs have accumulated $12.3 billion in assets under management.
While inflows have slowed in the second quarter of 2024 compared to the peak in the first quarter, analysts remain optimistic about continued demand. Matt Hougan, chief investment officer for Bitwise, believes that BTC ETFs are just getting started and could gather over $200 billion in inflows by the next halving in 2028.
The regulatory clarity brought by BTC ETFs is expected to have a positive impact on the long-term growth of Bitcoin. Central banks may also begin allocating Bitcoin as a non-debt reserve asset, contributing to a projected Bitcoin price above $250,000 by 2028.
In addition to ETFs, Bitcoin’s layer-2 ecosystem has emerged as a key driver for future growth. The recent Nakamoto upgrade to the Stacks network enhances transaction throughput and establishes finality for L2 transactions on Bitcoin’s base layer. This advancement in L2 infrastructure is expected to reignite interest in Bitcoin as users begin to separate BTC, the asset, from Bitcoin’s underlying rails.
The burgeoning Bitcoin L2 ecosystem has given rise to innovations like Ordinals and BRC-20 tokens. Ordinals allow for the creation and ownership of nonfungible tokens (NFTs) directly on the Bitcoin blockchain, while BRC-20 tokens propose a standard for issuing fungible assets on the Bitcoin network, similar to Ethereum’s ERC-20 standard. These developments are viewed as positive forces driving research and development around L2s, potentially leading to accelerated growth within Bitcoin’s developer landscape.
Looking ahead, experts predict further corrections and potential price fluctuations in the short term. However, factors such as surging ETF inflows and the thriving L2 ecosystem paint an optimistic picture of Bitcoin’s long-term trajectory.