Analysis of the effects on price and market sentiment

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Bitcoin’s next “halving,” an event that lowers the asset’s inflation rate about once every four years, is just 9 months away.

In Block 840,000 (which is expected which will occur on April 26, 2024), the amount of Bitcoin (BTC) produced every ten minutes will be reduced from 6.25 BTC to 3.125 BTC. For many Bitcoin holders, the event is expected to have bullish implications for the price of the asset, along with other factors.

Dennis Porter, executive director of the Satoshi Law Fund, foretold on Wednesday that the upcoming halving will help spark “the largest parabolic upward move in Bitcoin history.”

Like any other asset, the price of Bitcoin is dictated by the laws of supply and demand. When an asset is scarce and/or highly desirable, its price rises. Similarly, when an asset is plentiful but has little money chasing it, its price falls.

Theoretically, when a Bitcoin halving occurs, the amount of BTC available on the market decreases. As this effect compounds over time, the price of Bitcoin theoretically appreciates in reaction to its record scarcity.

At a glance, history seems to prove that theory. Following the Bitcoin halving events in 2012, 2016, and 2020, Bitcoin has experienced parabolic bull runs to new all-time highs in late 2013, 2017, and 2021, respectively.

However, some analysts are skeptical that the 2024 halving will have a similar impact by 2025. According to CryptoQuant’s head of marketing, Hochan Chung, the effect of Bitcoin’s halving on the asset’s price is likely it will decrease over time as the “new supply cap” decreases significantly.

In fact, Coinbase analysts published a report last month, suggesting that the bull markets that followed previous halvings may have been spurred by coincidental macroeconomic factors, rather than the halving itself. He stated:

“Outside of the third halving, the evidence that these halving events supported bitcoin price action is not entirely clear.”

However, many institutions already look bullish on 2025 and are putting money into Bitcoin hitting new highs. Bitcoin mining companies, including RiotCleanSpark and Iris Energy have made significant infrastructure investments this year in explicit preparation for the 2024 halving.

Meanwhile, standard charter Banking analysts recently called for Bitcoin to hit $120,000 per coin by 2025, buoyed by miners hoarding their coins during the bull cycle and absorbing market supply. Rich Dad Poor Dad author Robert Kiyosaki currently has the same price target

Retail investors have also started to HODL. On-chain data shows that “shrimps”, Bitcoin addresses that contain less than 1 coin, alone accumulate more than 33,000 BTC per month, more than all miners create.