The Bitcoin (CRYPTO: BTC) halving, one of the year's most anticipated events, is just weeks away. Crypto watchers find this event as stunning as astronomers do a total solar eclipse. Should you trust the hype? After all, Bitcoin is already trading around all-time highs and up more than 50% this year due to the new spot Bitcoin ETFs.
How high can Bitcoin go? To answer, let's examine the halving's probable effects.The halving... and not The halving happens every four years. Crypto miners receive half the Bitcoin earnings after the halving. Everything is algorithmically controlled, and nobody can modify it. Bitcoin's creator, Satoshi Nakamoto, can't change it.
Each block mined earns Bitcoin miners 6.25 Bitcoins. Around April 20, that will be 3.125 Bitcoins. Thus, Bitcoin miners are most affected by halving. Bitcoin investors may find this boring. Since the halving is not a stock split, they won't get extra Bitcoin. Cutting its dividend in half doesn't affect its overall rate of return, as you might expect.
Finally, halving does not halves Bitcoin supply. The rate of Bitcoin generation is cut in half. The rally usually lasts 12–18 months.
Bitcoin's history Bitcoin halvings in 2012, 2016, and 2020 were spectacular. Bitcoin has risen to new highs each time. Consider what happened following the May 2020 halving. At the time, Bitcoin traded around $10,000. However, 18 months later, it reached a record $69,000. A almost sevenfold price increase in a short time.
The issue is that past performance does not guarantee future performance. Yes, we've observed the same pattern three times, but it could be a coincidence, like tossing a coin three times and getting heads each time. Your odds of getting heads on the fourth flip are the same as on the first.
In addition, Coinbase Global (NASDAQ: COIN) recently calculated a small-sample-size issue. There may not be enough data for statistical analysis.
Compare small sample size to a baseball season. Can you forecast a 162-game season from the first two weeks? Can you forecast a pitcher or hitter's season from a few games? Like data from three prior Bitcoin halving cycles, we may assume we know what's coming but not.
Back to basics For that reason, I'm modeling the Bitcoin halving using Economics 101. Supply and demand are the basics. At a time when there isn't much Bitcoin to mine, Bitcoin supply growth is halving. Bitcoin's algorithmically capped quantity is 21 million coins, and we're at 19.7 million. That supports Bitcoin's "scarcity" claim.
The emergence of spot Bitcoin ETFs has increased interest from ordinary and institutional investors scrambling to incorporate Bitcoin to their portfolios. As these investors raise their Bitcoin investments, demand should rise. The combination of rising demand and stable supply should raise prices. As long as investors like Bitcoin ETFs, this might have a big influence. More than $30 billion has poured in.
If Bitcoin has another post-halving surge, this number could rise even further, raising the price and... This cycle could last 12 months.
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