Bitcoin is days away from a momentous shift to its underlying network that will forever change how the cryptocurrency operates. Some analysts predict it will also have a major impact on its future price trajectory.
The bitcoin halving, as it is known, will slash in half the number of new bitcoins brought into existence through crypto mining. This reduction in supply was hard coded into bitcoin at its inception in 2009, and takes place roughly every four years.
The last halving in 2020 preceded a five-fold increase in bitcoin’s price, following a pattern that has seen record-breaking rallies for the cryptocurrency after each previous halving.
“History doesn’t repeat, it rhymes – meaning as details, circumstances and settings may change, it will still play out with many similarities,” Danny Scott, chief executive of crypto platform CoinCorner, told The Independent.
“The majority of people outside bitcoin don’t understand what the halving is or the role it plays. The halving helps naturally increase price due to supply and demand over a medium to long term outlook, which in turn brings new people in as the price increases past previous all time highs. So indirectly it plays a huge part in shaping investor sentiment and market speculation.”
Scheduled to take place on Friday, 19 April, the latest bitcoin halving comes at a time when the crypto market is already buoyant, having hit an all-time high in March.
In January, the US Securities and Exchange Commission (SEC) approved the first ever bitcoin spot exchange-traded funds (ETFs), bringing billions of dollars worth of institutional investment to the market for the first time. This increase in demand, combined with the upcoming reduction in supply, has led some analysts to believe that bitcoin could hit new heights in the coming months.
“Historically, the value of bitcoin has increased after each halving event. This trend is likely to continue during the current market cycle, considering the high amount of institutional interest,” Kadan Stadelmann, chief technology officer of blockchain firm Komodo Platform, told The Independent.
Ramani Ramachandran, chief executive of Router Protocol, added: “Institutional demand will be truly present during this halving, and already looks like it could outpace the massive retail demand seen after each previous halving. The two forces combined will be extremely interesting to watch.”
A recent survey of institutional investors and wealth managers found that 69 per cent of respondents thought bitcoin’s halving would increase investment into the cryptocurrency. Only 2 per cent of those surveyed said they thought it would result in a reduction in investment.
The research from digital asset management firm Nickel found that other cryptocurrencies are also predicted to benefit from the halving, with the likes of Ethereum (ETH) being boosted by increased interest in the crypto space.
