In the cryptocurrency market, we are on the verge of a unique event that occurs approximately every four years. This is the Bitcoin halving, anticipated to take place on April 20th.
The Bitcoin halving is a scheduled event where the reward for mining and verifying new blocks is reduced by 50%, meaning miners will only earn half the BTC for a mined block.
Currently, Bitcoin miners receive a reward of 6.25 bitcoins for mining a block, which is significant, especially since at the beginning of April, the price of Bitcoin was $67,500 (267,500 PLN).
– After the halving, this reward will drop to 3.125 Bitcoin, thereby halving the reward – explains Michał Stajniak, an expert at XTB, in an interview with MarketNews24. – The purpose of the Bitcoin halving is to prevent the supply of Bitcoin from growing indefinitely. Thus, the supply is reduced every four years.
This reduction in supply should trigger a price increase. Typically, significant price increases have been observed before and after the “halving.” This occurs over the year leading up to the halving and the year following it.
– The biggest price increases usually occur just before the halving – the XTB expert clarifies. – Afterwards, the market stabilizes, and then, within 150-200 days, we see again spectacular increases. In 2016 and 2020, these increases reached several hundred percent compared to the halving date.
However, the situation in the financial markets is different now. The SEC recently approved Bitcoin ETFs. These ETFs have been purchasing Bitcoin from the market at a much higher value than the daily block mining reward. After the halving, it may turn out that funds will have to buy even more of this cryptocurrency on the market, which will drain liquidity and cause Bitcoin to become even more expensive.
Yet, these are theoretical considerations, given the speculative nature of a currency whose daily volatility has often exceeded several tens of percent.
At the same time, hopes are fading that the SEC will approve ETFs for Ethereum. This makes Bitcoin likely to remain the most expensive cryptocurrency.
– As for Bitcoin and Ethereum, the situation will be similar to that of gold and silver, with gold always being much more expensive than silver – concludes M.Stajniak from XTB. – Investors will store Bitcoin similarly to how they store gold.
