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As the 2024 Bitcoin halving event approaches, investors may wonder if it will transform how they see crypto in the long haul or just another event of the expected market cycle.
While halving is not an infrequent phenomenon, it is different this time because it follows the creation of Bitcoin exchange-traded funds (ETFs), something that investors have never had to consider. Bitcoin ETFs have revived crypto as an investable commodity in more ways than people realize. Because of ETFs, Bitcoin rose past its historic high just a few months ago.
Bitcoin ETFs have added a new twist to the traditional narrative.
Unlike previous halvings, where the block reward for miners is halved roughly every four years, this time, the presence of Bitcoin ETFs introduces a new element that could shake up the post-halving landscape.
ETFs can disrupt the pattern halving cycles usually take, creating fresh opportunities and challenges for investors.
What exactly is Halving?
For those unaware, Bitcoin’s supply is capped at 21 million. Miners validate transactions and earn block rewards in the form of new coins. The halving, a core feature of Bitcoin’s design, aims to control inflation by reducing the rate at which these new coins are issued.
Historically, halving events have often triggered significant price hikes. After the first halving in 2012, Bitcoin’s value skyrocketed from around $12 to over $1,000 a year—an approximate 8300% increase.
Similarly, bitcoins have increased significantly with each halving event, but less than after the first. In the most recent halving, which took place in 2020, investors and miners saw a more gradual price increase, in which Bitcoin peaked at about $60,000 a coin.
Will 2024 be an outlier?
While past halvings have led to price surges, relying solely on historical trends can be risky. External factors like major economic events have also played a crucial role.
The 2024 halving is very different from what we have had in the past, mainly because of the advent of spot Bitcoin ETFs. These ETFs offer a new way for investors to access and invest in Bitcoin and, therefore, have a more extensive. These ETFs have attracted billions of dollars in investments in the first quarter alone. This may have offset the post-halving selling pressure we usually see following a halving event.
Traditionally, halvings have led to miners selling their holdings as rewards decrease. However, the influx of capital through ETFs might counteract this.
The way forward
The convergence of ETF adoption and evolving market dynamics set the stage for Bitcoin’s continued growth. While Bitcoin remains at the forefront, the 2024 halving holds significance for the entire crypto ecosystem.
Investors have to stay frosty and be on their toes, quick and adaptable. By understanding the implications of the halving and the role of ETFs, investors can position themselves to seize opportunities and navigate potential challenges in the evolving crypto landscape.
