In the context of the bull market, which sets the tone of the cryptocurrency market, Binance, the world's leading cryptocurrency and blockchain infrastructure provider, reinforces its commitment to the sustainable growth of the ecosystem and education, for informed decision making by each user. Today more than ever, DYOR (“do your own research”).
Day by day, new people enter the crypto space, in a context marked by macroeconomic cycles and industry trends, which can influence how investors feel about some assets, and impact prices.
While Binance does not comment on market variations or make recommendations on any type of investment, in this context, Min Lin, Binance's regional vice president for Latin America, seeks to offer an analysis on what the upcoming Bitcoin halving means. for the cryptocurrency industry and broader financial landscape:
To begin, it is necessary to understand what the so-called halving is. The Bitcoin halving, which occurs every four years, is a crucial event that halves the reward for mining new blocks, thus reducing the supply of new Bitcoins. The halvings essentially increase the scarcity of bitcoin, which can influence demand and further reinforce the narrative of bitcoin as digital gold.
Historically, Bitcoin has seen notable price increases in the six months following each halving event. These price dynamics highlight the market's response to the reduced supply of new BTC, with rising demand often driving up the value of the cryptocurrency. Although past performance is not indicative of future results, these historical trends provide insights into the potential impact of halving events on Bitcoin price dynamics. However, whether there is more room for price growth depends on the overall market sentiment, adoption rates, and other factors at play during the time of the halving event.
For example, recent approvals of spot bitcoin ETFs in the United States have increased demand and helped expand bitcoin's reach. The new ETFs have already seen billions of dollars in inflows. Bitcoin exchange-traded funds open the possibility for traditional investors to have exposure to crypto in their portfolios. With this, direct investment in bitcoin and various regulated instruments begin to coexist, allowing diverse investment strategies and adapting to different risk profiles and preferences. This signals the possibility of a new era of adoption and legitimacy, not only for bitcoin but also for the crypto space in general.
In this context, this year's Halving is one of a kind as it comes amid a series of other significant events in the Bitcoin and crypto ecosystem in general. In addition to the ETF advance, which has sparked institutional interest and participation, another important trend in crypto today is the rise of Layer 2 and DeFi activity on the Bitcoin network, driven by the popularity of the Ordinals protocol and Bitcoin inscriptions.
Although the points above seem to offer a bullish outlook for BTC and the crypto market in general, it is important for investors, especially newcomers to the crypto space, to manage their expectations, and always make informed decisions. No immediate price changes are guaranteed in the wake of the halving, and its fundamental importance will manifest itself in longer trends in value, liquidity, adoption, and the position and acceptance of crypto as an asset.
Beyond the price of BTC, the halving may have long-term auspicious effects across the ecosystem, with benefits spilling over to other assets and projects and spurring infrastructure construction and product innovation in the space.
In this context, more than ever, it is important for each user to always do their own research, analyze the platforms' proposals based on their reputation and not limit themselves to putting their money in whoever promises high immediate returns. Making decisions based on reliable information is key to reducing risks.
For those who are just starting out, the best way to take advantage of the benefits of the crypto world is to inform yourself, understanding the characteristics of the market and the different assets available. It is important to understand the fundamentals of blockchain technology, such as the various types of cryptocurrencies and market dynamics, before investing in any cryptocurrency.
For those looking to delve deeper, Binance Academy, the educational arm of the exchange, offers a wide range of content on blockchain, cryptocurrencies and related technologies, for all levels of knowledge. The content is free and available in more than 30 languages.
ATTACHMENT
Past Halvings and Their Impact on Price Trends, Mining Activity, and Adoption
Interestingly, Bitcoin reached new all-time highs in each four-year period between the previous halving events.
Doubling mining costs per token could lead some miners to leave the market, especially those with less efficient operations or higher operating costs. This reduction in the number of miners could potentially impact the network's processing capabilities, at least temporarily. On the other hand, we could also see some of the larger miners find opportunities to acquire smaller competitors or see more mergers in the space, as miners look to consolidate operations.
The Bitcoin network has demonstrated resilience in the face of these challenges in the past. Advances in mining technology and strategies, as well as possible adjustments to mining difficulty, could mitigate the impact of reduced miner participation. Additionally, some miners may choose to switch to alt-coin mining or explore alternative sources of income within the crypto space, which could help maintain a balance in the overall mining ecosystem.
Previous halvings have had considerable effects on crypto adoption. Within the first 150 days of each of the previous halvings, the number of new BTC addresses grew: 83% in 2012, 101% in 2016, and 11% in 2020. The number of addresses that had $100 or more, an indicator of the number of retail investors, increased 12% and 6% in 2012 and 2020, respectively, and remained roughly the same 150 days after the 2020 halving. The number of wallets holding more than $1 million, which can be seen as an indicator of professional or institutional investment activity, increased thousands percent in 2012, 10% in 2016 and 43% in 2020. Although these are imperfect indicators of adoption dynamics (for example, a person can create multiple wallets), they at least suggest the direction and magnitude of trends in the aftermath of past halvings.
The value of BTC before and after each halving
First halving (November 28, 2012)
On the day of the halving, the price of Bitcoin was approximately $12. Six months later, around May 28, 2013, the price had increased significantly to about $130, showing a substantial increase.
Second halving (July 9, 2016)
The price of Bitcoin was around $660 on halving day. Around January 9, 2017, the price increased to about $900, indicating considerable growth in value during those six months.
Third halving (May 11, 2020)
The price of Bitcoin was around $8,600 on halving day and rose to over $15,700 six months later, around November 11, 2020.
