On January 10, 2024, local time, the U.S. Securities and Exchange Commission officially approved the listing and trading of Bitcoin ETFs, and the trading volume on the first day reached 4.6 billion U.S. dollars. Since then, the prices of virtual currencies including Bitcoin have skyrocketed. Bitcoin once stood at a high of 73,000 US dollars, and then fell sharply to 61,000 US dollars. Recently, it has returned to a high of 72,000 US dollars. The market generally believes that the Bitcoin "halving effect" and the issuance of spot ETFs are important factors driving the current round of Bitcoin price increases. Bitcoin has re-emerged at 70,000 US dollars, and market sentiment seems to have risen again after a brief cooling. The "halving" event in April is about to happen, and Hong Kong's virtual asset spot ETF is about to be launched. Under the influence of multiple factors, will the Bitcoin encryption market set off a wave again?
01 - Bitcoin ETF approved, injecting a large amount of funds into the Bitcoin market
Bitcoin ETF (Exchange-Traded Fund) is a financial product that tracks the price of Bitcoin and is traded on traditional stock exchanges. It allows foreign investors to invest in Bitcoin indirectly by purchasing ETF shares, without having to directly purchase and hold actual Bitcoin assets, providing investors with a more convenient and regulated way to invest in Bitcoin.
On January 10, 2024, the SEC approved the listing of the first 11 spot Bitcoin ETFs, which is regarded as an important milestone in the cryptocurrency industry, marking the recognition and acceptance of crypto assets such as Bitcoin by the traditional financial market, and can attract more institutional investors and retail investors to enter the cryptocurrency market, thereby increasing the liquidity and maturity of the market.
02 - Bitcoin's "halving" is coming in April, or will it continue to rise?
Halving: Reducing the Reward, but Doubling Down on Value and Scarcity!
Bitcoin halving: reducing rewards, but doubling value and scarcity!
What is Bitcoin "halving"? Bitcoin "halving effect" refers to the halving of the reward for Bitcoin miners every time the Bitcoin blockchain generates 210,000 blocks. This is a standard set by the creators of the blockchain to continuously reduce the speed of cryptocurrency introduction. This is part of the Bitcoin protocol, simulating the natural process of gold mines gradually decreasing in gold mining. It is a periodic recurring event that occurs approximately every four years to reduce the supply of Bitcoin. The next round of "halving" will occur in April 2024, and the Bitcoin block reward will drop from 6.25 to 3.125. The specific time depends on the block generation speed of the Bitcoin network. The general prediction in the market is between April 19 and April 23.
Why does the Bitcoin halving happen? Bitcoin is designed to be deflationary in nature, meaning that over time, the number of new Bitcoins created will gradually decrease in accordance with a predetermined halving mechanism, with the total supply eventually being fixed at 21 million. This helps prevent inflation by reducing the rate at which new Bitcoins enter circulation and ensuring that the total supply gradually approaches this cap. This is in stark contrast to traditional fiat currency systems, which are usually controlled by central banks and can increase the money supply as the economy needs it, sometimes causing the value of the currency to fall, i.e. inflation. The deflationary nature of Bitcoin, i.e. the fixed and gradually decreasing supply, theoretically increases the value of a single Bitcoin, thereby encouraging holding (i.e. "hoarding") rather than spending it, as users expect it to increase in value in the future. In addition, this design also attracts investors, who see Bitcoin as a potential store of value, similar to gold, and believe that market demand may drive its price up in the face of a decreasing new supply. Therefore, the Bitcoin halving is seen as an incentive mechanism designed to promote long-term investment rather than immediate consumption.
The halving mechanism is considered to be a major feature and advantage of Bitcoin. It builds a "scarcity" of digital currency and avoids the risk of depreciation caused by inflation of legal currency. Halving will slow down the issuance of Bitcoin, thereby increasing its value reserve function.
Since the halving reduces the supply of new Bitcoins, the demand for new Bitcoins usually increases. By observing the price of Bitcoin after each previous halving event, it can be noticed that the price of Bitcoin generally rises after the "halving" event. Therefore, before the "halving" event in April, a large number of investors poured into the Bitcoin market in order to profit from the reduction in supply and the increase in price.
After the first halving, Bitcoin increased by 92 times; after the second halving, Bitcoin increased by 30 times; after the third halving, Bitcoin increased by 8 times; after the fourth halving, Bitcoin can increase by ___ times?
03 - What impact will the 2024 halving have?
Looking at the macro situation in 2024, it seems that there are many factors that will add support to the Bitcoin halving:
1. Institutional funds continue to flow in: Since the beginning of this year, spot Bitcoin ETFs have been approved in the United States, attracting a large amount of institutional funds. The entry of these long-term funds will undoubtedly add momentum to the rise in the price of the currency after the halving.
2. On-chain activities are heating up: The "Ordinals" protocol on the Bitcoin chain has brought new applications such as NFT, which has driven the growth of transaction fees. This undoubtedly brings more income to miners and helps maintain network security.
3. The macro environment is improving: With the arrival of the Fed’s interest rate cut cycle, inflationary pressure will be alleviated. This is conducive to the restoration of cryptocurrency market sentiment and warming up for the next round of bull market.
4. Strong technical performance: From the perspective of technical indicators, models such as Bitcoin's MVRV Z-score and power law corridor have shown positive signals. These quantitative analyses support the possibility of Bitcoin's price rising in the future.
5. Miners are prepared: For miners, halving means a decrease in revenue. However, large miners have made plans in advance to improve efficiency through listing financing, purchasing advanced equipment, etc. to cope with the challenge of halving.
04 - Optimistic expectations from industry insiders
In addition to the above positive factors, many industry insiders and institutions are also optimistic about the price of Bitcoin after the halving in 2024. For example: Skybridge Capital founder Scaramucci predicts that Bitcoin will reach $170,000 or more by July 2025; Bernstein predicts that Bitcoin will hit a new high in 2024 and peak at $150,000 in mid-2025; and other institutions such as Enron Capital predict that the average price of Bitcoin in 2025 is between $150,000 and $200,000. At the Hong Kong Web3 Carnival in April 2024, ARK Invest CEO and Chief Investment Officer Cathie Wood "Wood Sister"---In 2030, Bitcoin will rise to $1.5 million.
Investors: Confidently show success in the cryptocurrency wave.
In general, the Bitcoin halving, which takes place every four years, is not only a "grand event", but also an important node for the healthy development of the cryptocurrency ecosystem. By building the scarcity of digital currencies, the halving mechanism has injected new momentum into the rise in coin prices. As the halving approaches in 2024, multiple positive factors such as the entry of institutional funds, the heating up of on-chain activities, and the improvement of the macro environment are intertwined, making global investors more optimistic about the future performance of Bitcoin.
Of course, we must also remain cautious and rational, as there is still considerable uncertainty in the cryptocurrency market. But it is undeniable that the Bitcoin halving will fuel the next round of bull market, so let us wait and see!
Bitcoin halving countdown:
