With the Bitcoin halving less than three weeks away, speculation continues unabated over what will happen to the price of Bitcoin once block rewards for miners are cut in half. While some firms have shared glowing projections of potential price surges, crypto exchange Coinbase is urging caution to investors.
“As you read the fine print or Safe Harbor language on any material coming from an institutional source, the first language seen [in] past performance is not an indicator for future success or performance,” Coinbase Asia-Pacific (APAC) Managing Director John O’Loghlen told Decrypt. “So I think that’s very much our approach in terms of our branding.”
Leading up to the halving, Bitcoin surged to a new all-time high of $73,737 on March 14. Bullish investors like SkyBridge Capital founder and managing partner Anthony Scaramucci believe Bitcoin could surge to a price of $200,000 within 18 months of the halving. Other industry analysts have targeted post-halving price projections of $150,000.
The Bitcoin halving refers to a periodic event built into the protocol that reduces rewards for mining Bitcoin blocks by half—every 210,000 blocks, or approximately every four years. This is to slow down the rate at which new Bitcoins are generated, limiting inflation and extending its issuance over time.
The next halving will occur on or around April 20, 2024, and the recent Bitcoin price surges are believed to be influenced in part by the upcoming milestone. But Coinbase is urging investors to keep a level head about the potential market movements to come.
“When you look back at these cycles, it takes the market some time, particularly the research market time to appreciate what’s going to happen,” O’Loghlen said. “So I would just urge people to take a step back, have a bit of an exhale, and try to see if there are proxies or other metrics they can look at to give themselves confidence.”
Even as the bullish sentiment around Bitcoin continues, Coinbase urged caution, saying correlation doesn’t imply causation, and that price movements have many influences: market sentiment, adoption trends, and macroeconomic conditions for starters.
A form of technical analysis, some speculators use past halving events as part of their data set for making predictions. Analyzing Bitcoin’s price changes due to halvings is tricky with only three past events. Past halvings showed varied price changes, showing context matters, Coinbase explained, adding that more halvings are needed for clearer patterns.
The impact of institutional interest
Further setting the 2024 halving apart from past events is the addition of Bitcoin ETFs to the equation.
“I think you can’t decouple the new demand for Bitcoin with the announcement of the spot ETFs,” O’Loghlen said. “I think that that’s a reality that sunk in and then we need to watch where does it go from here.”
In January, the U.S. Securities and Exchange Commission approved 11 Bitcoin ETFs. Since then, billions have flowed into spot ETFs from firms including BlackRock, Bitwise, Hashdex, VanEck, and Fidelity.
While the SEC has been called hostile to cryptocurrency and regulating by enforcement, O’Loghlen said that regulators with the Australian Securities & Investments Commission have taken a “conservative stance.”
“There have been some cases in Australia in recent times where ASIC has challenged issuers of various loans and other products in the Australian market, which they deem as breaking or contravening current ASIC and company securities law in Australia,” O’Loghlen said. “There has been some good pushback and legal precedents on those quite recently that support the digital asset industry.”
The cryptocurrency industry, O’Loghlen said, must do more to educate policymakers about the technology and digital assets.
“It’s important for us as an industry to really try and push crypto digital asset regulation up the totem pole of importance, because in Canberra as in Washington, a number of really big things are happening,” he said. “Crypto is not always the most important information in front of the senators or congressmen or their representatives. But in recent times, we’ve had some very good momentum behind that.”
How will Coinbase handle the halving?
Cryptocurrency exchanges often experience outages during Bitcoin rallies, which bring massive surges in user traffic, trading activity, and wild swings in Bitcoin’s price. For some traders, Coinbase crashing during high volatility has become a sign of an imminent bull run.
Coinbase is ready for the halving, O’Loghlen said.
“Coinbase has been in the midst of a crypto winter, and that’s the best place in the world to be stress testing your business and building for that next bull run,” he said. “To make sure that you’re not out of pocket, you’ve got enough liquidity and you’ve got enough money in treasury in various countries around the world. You’re going to be able to absorb the impact of those surges in interest.”
Last month, during a surge in frenetic traffic, Coinbase crashed again, reporting degraded performance on the exchange’s status page. Coinbase customers began reporting zero balances in their wallets.
“A small subset of users may see intermittent zero balance across their Coinbase accounts and latency across pages,” Coinbase’s status page said, adding that trading was not impacted.
With the start of the latest bull market, O’Loghlen said Coinbase has seen record interest and adoption of the platform, adding that the company has been ready but acknowledges hurdles.
“It’s terribly important to us the resilience of our network, huge effort on cybersecurity,” O’Loghlen said. “And to ensure that from a security standpoint, we’re really dotting our I’s and crossing our T’s.”
Looking ahead
Noting consistent daily net inflows into US spot Bitcoin ETFs, Coinbase said this halving cycle may be different with a massive tailwind for Bitcoin, contributing to tighter market dynamics as the supply of newly mined Bitcoin falls. Meanwhile, Bitcoin ETFs symbolize the formal recognition of cryptocurrencies as a new asset class by major financial institutions,
In its report, Coinbase said it believes the current price move is only the beginning of a longer bull run and will take further price appreciation to drive supply vs demand dynamics.
“I think this event is just another anchor and another data point in the industry’s journey. There have been Bitcoin halving before, there will be Bitcoin halvings again, well beyond our lifetime,” O’Loghlen said. “This is another event, it’s an important event, but it’s not going to define the industry,” he said, giving, for example, the collapse of FTX.
“It’s just another important structural events in the journey of crypto,” he concluded.
Edited by Ryan Ozawa.
