With Bitcoin's halving event just around the corner, it certainly seems like we're on the cusp of something big. While everyone's eyes are glued to the skyrocketing bitcoin {{BTC}} price and the possibility of record-breaking highs, the ripple effects are far-reaching. They will touch every corner of the crypto market, and could even signal an end to crypto’s four-year bull/bear cycle.

This feature is part of CoinDesk’s “Future of Bitcoin” package published to coincide with the fourth Bitcoin “halving” in April 2024.

Daniel Polotsky is the founder of CoinFlip.

Yet, it's not just about the numbers; it's about the potential for a seismic shift in how we perceive and interact with digital currency. Brace yourself — this could be the beginning of a whole new era for crypto.

Bitcoin's ascendance

Bitcoin's value has surged of late, buoyed by anticipation surrounding the upcoming halving event in April, alongside milestones like the approval of spot bitcoin exchange-traded funds in the U.S. and major financial institutions such as BlackRock publicly entering the space. This institutional interest has led to unprecedented demand, with bitcoin hitting a new all-time high above $73,000 on March 13. This was likely driven by record-breaking inflows into ETFs, including a $1.045 billion influx on March 12.

This transition marks a more widespread acknowledgment of cryptocurrencies as a legitimate asset category, marking the onset of a new phase in institutional investment. It has also further bolstered Bitcoin's credibility and accessibility to retail investors.

These landmark developments enable investors to gain exposure to Bitcoin without the complexities associated with direct ownership. The increased liquidity and stability will likely continue to attract a broader range of investors, driving greater mainstream adoption and helping further fuel the current surge in bitcoin's valuation.

See also: Spot Bitcoin ETFs Are Just the Beginning for Wall Street | Opinion

There are, of course, still bears out there. Yet, with projections ranging from $150,000 to $250,000 per coin, the bitcoin market is on the brink of a substantial inflow of institutional capital. This will signal a potential transformation in its historical cyclic dynamic that would drive new levels of growth and innovation across multiple digital asset sectors.

Every silver lining has a touch of gray

Despite the apparent bullish momentum in the cryptocurrency market, several factors could disrupt this trajectory. Persistent inlation may prompt tighter monetary policies, affecting riskier assets like cryptocurrencies. Sluggish economic growth could also dent investor confidence, diverting attention from speculative investments.

Another short-term concern lies in the bitcoin mining industry. The upcoming 2024 halving event is expected to trigger significant consolidation and defaults, as cash-strapped mining firms will struggle with slimmer profit margins and high operational expenses. This could force them to dump their bitcoin as they enter bankruptcy, which may keep the price down. Additionally, regulatory oversight and lack of funding pose challenges, potentially exerting downward pressure on prices.

Uncertainty surrounding the 2024 elections adds yet another layer of unpredictability. Political outcomes could lead to varying regulatory changes, with potential shifts in the U.S. government's stance towards cryptocurrencies. While a Republican presidency may offer a more favorable regulatory environment, Democrats might become more receptive to the industry due to alignment with values like financial inclusivity and environmental sustainability. This may potentially foster bipartisan support for cryptocurrency regulation.

The end of the crypto boom/bust cycle?

Maybe most tantalizing of all could be the unanticipated secondary effects of the halving. While historically a driver of bullish cycles, the halving's impact may be overshadowed by the other factors mentioned above, such as staggering ETF net inflows. Total net inflows have surpassed $15 billion.

The strategic intervention of institutions and retail ETF investors guided by more experienced financial advisors adept at “buying the dip,” looms large as a factor that could potentially dampen the halving's effectiveness in driving the market forward.

This would mean the end of crypto’s typical four year bull/bear cycle, seemingly tied to the bitcoin halving, and instead suggest a trajectory of relatively stable upward growth, with ETF inflows emerging as the primary catalyst for crypto adoption. It's notable that this is the first time bitcoin's price has rocketed up before the halving, which in year's prior has preceded bitcoin bull runs.

This shift could have profound effects across the industry. Initially, crypto's ethos was rooted in a countercultural resistance against centralized currencies and institutions with the mantra "not your keys, not your coin." Now it seems the predominant force in crypto could soon be controlled by a handful of institutions, with ownership dispersed among individuals who lack access to their own keys — contrary to the original ideals of decentralization.

A tilt towards institutional ownership could lead to something even bigger: the ownership of bitcoin by sovereign nations. More countries may follow El Salvador's lead and initiate a race to accumulate cryptocurrency, potentially initiating a global mainstream adoption super cycle.

See also: Qatar's Sovereign Fund Might Be Buying Bitcoin

This change might also lead to a departure from the intense boom-and-bust cycles traditionally associated with cryptocurrency markets, fostering a more stable environment for growth and development within the sector.

While fewer retail investors will experience the euphoria of a bull market, the good news is that they will also be spared the brutal reality of buying at the peak and getting their face ripped off as the market plummets.

This new stability could provide crypto companies and projects with the opportunity to focus on sustainable, long-term development, rather than timing market cycles and facing extreme headwinds during crypto winters.

As investors and enthusiasts prepare for heightened volatility, it's evident that the market is on the brink of unprecedented growth and, potentially, a fundamental paradigm shift. While it is bittersweet, this upcoming period could be viewed as the end of cryptocurrency's infancy, marking a significant evolution in its history. Before saying goodbye, we should all be ready to celebrate its Last Dance.