Understanding the impact of halving on Bitcoin is essential for investors. Bitcoin halving occurs every four years. It is an event that halves mining rewards and reduces Bitcoin supply. As a result, the impact is hotly debated, with the leading cryptocurrency usually rising after the event.
After previous halvings, the price of Bitcoin has generally risen not long after. However, it is rare to see BTC hit a new all-time high ahead of the event.
Bitcoin hit a new high of well over $73,000 last week, although it pulled back to above the $64,000 mark over the weekend. Nevertheless, it is now back over $68,000.
For the year-to-date, Bitcoin is up more than 61%, while in the last 12 months, it has risen more than 152%.
Speaking to Investing.com, Yuya Takemura, Founder of Axys Holding, noted that Bitcoin halving events typically lead to the price rising.
“The next halving in 2024 may follow this trend, possibly causing a significant price increase in 2025,” said Takemura. “Considering Bitcoin’s past performance and increasing adoption, a significant price increase in 2025 is plausible. Factors such as limited supply, growing institutional interest, and wider acceptance in payment systems play a role.”
Takemura also recognized that the global recognition through ETF approvals, Gen Z’s growing participation, and blockchain adoption by authoritative entities could impact the price. However, he cautioned that the Bitcoin market is volatile and susceptible to global economic conditions.
Meanwhile, Menno Martens, a crypto specialist and product manager at VanEck, told Investing.com that “historical trends show that Bitcoin tends to rally before, during, and after halving events.”
However, he said, “It should be noted that there are some exclusions, for example, Bitcoin also sees significant corrections of over 82% and 80% down during the 3rd and 2nd cycle respectively.”
“Bitcoin’s price recovery to previous ATH seems to be faster than previous cycles. Bitcoin’s price is above the previous ATH already, suggesting this cycle may be different and making a significant correction likely,” cautioned Martens.
He believes that what sets this particular halving apart is the introduction of a Spot Bitcoin ETF in the US market.
“While similar products, like the VanEck Bitcoin ETN, have been available since 2020, the launch of a Spot ETF in the US is seen by many as a watershed moment for Bitcoin, akin to the IPO of a major asset,” he added. “Comparisons are drawn to the effect of ETFs on the gold market, where an eight-year bull run followed the launch of gold ETFs.”
Furthermore, Martens explains that ETFs play a significant role in market dynamics, holding over 4.2% of circulating Bitcoin and absorbing a considerable portion of newly minted coins daily. As a result, he believes the absorption may intensify post-halving, potentially reducing the available Bitcoin supply for non-ETF investors.
“If demand remains high, as observed in recent weeks, this could theoretically lead to significant price appreciation,” he said. “The risk is that Bitcoin could also see significant corrections.”
Elsewhere, in a recent research note, analysts at JMP Securities said they believe Bitcoin price could reach a high of $280,000 within the next three years, driven by the anticipated Bitcoin ETF inflows.
“We estimate that after ~$10B inflows to date, two months into launch, flows will actually continue to grow materially from here over the next few years as the ETF approval is just the beginning of a longer process of capital allocation,” JMP wrote.
The investment firm calculates around $220 billion of incremental flows into Bitcoin ETFs over the next three years.
“We estimate a current multiplier of ~25x, which on our flow estimate would equate to an incremental $280K per Bitcoin,” they added.
Meanwhile, Bernstein said it is now “more convinced” about its $150K price target for Bitcoin.
“Bitcoin today is at $71K, we expected this to break out post-halving. We built Bitcoin institutional flows in our estimates to arrive at Bitcoin price. We estimated $10Bn inflows for 2024 and another $60Bn for 2025,” the firm explained.
Source: Cryptocurrency - investing.com
