The small boom at the end of June allowed Bitcoin’s price to rebound from $25,000 to $30,000: now everyone is waiting for the next halving.
Bitcoin analysis: in anticipation of the next halving
Fineqia International research analyst Matteo Greco points out that last week’s close at $30,600 corresponds to an increase of only 0.5% from the previous week’s closing price of $30,500.
What’s more, on Friday BTC fell to $29,500 after the SEC declared that the documents for spot Bitcoin ETFs submitted by several companies were inadequate. But that drop was immediately reabsorbed thanks to the rapid resubmission of applications by all asset managers involved.
Greco also reminds us that we are now less than 12 months away from the next halving, scheduled more or less for late April 2024.
The BTC halving is the event that cuts by half the rewards for miners who validate new blocks, as rewards will drop from the current 6.25 BTC per block to 3.125 BTC per block.
The event occurs every 210,000 blocks, or just under 4 years, and historically the months leading up to the halving have seen the beginning of a bullish trend for the market. This leads many crypto market players to watch the second half of 2023 carefully.
The halving of Bitcoin
The one in 2024 will be the fourth halving.
The first one, namely the one in 2012, closed Bitcoin‘s first cycle, but it was anomalous in terms of price. In fact it went from $0 to about $10 in a little over two and a half years, since the first public exchanges were made about mid-2010.
However, as early as the year following the first halving, that is, in 2013, the first major speculative bubble in Bitcoin’s price inflated to a peak of about $1,100.
2014 and 2015 were the years of the worst bear-market ever on the price of Bitcoin, but in 2016 in anticipation of the second halving a small bullish cycle was triggered.
In fact, the price of BTC rose from $320 in November 2015 to $770 in the weeks leading up to the halving. Following the halving it fell as low as $550, only to rise again later so as to close 2016 above $900.
The year following the second halving, i.e., 2017, also saw a resounding speculative bubble inflate on the price of BTC that brought it close to $20,000.
2018 was a difficult year, but already in 2019 the price began to rise a bit ahead of the next year’s halving.
In fact, in 2019 it went from $3,400 to $13,000, on the wave of the launch of Facebook’s Libra project, and then back to $10,000 in early 2020. In March of that year there was the collapse of global financial markets due to the onset of the pandemic, but by the time of halving in May, the price was back to $10,000.
So excluding what happened before the first halving, when Bitcoin’s market was still largely immature, in 2016 before the halving there was a 140% increase, while in 2020 it was 190%.
In 2023 so far it is at +86% since the beginning of the year, so in theory there is still ample room for growth.
Bitcoin mining
The main problem will be for the miners, because suddenly they will see their rewards halved.
However, it should be remembered that the miners do not only collect the premium, but also the fees. So as the premium is cut in half, mining’s share of revenue from fees will grow larger and larger, eventually reaching 100% of revenue in 2140.
Be that as it may, one of the industry leaders in BTC mining, Riot Platforms, has already announced a $162 million investment to purchase an additional 33,280 miners, with the goal of nearly doubling its power in anticipation of the halving.
Bitcoin mining is a competition in which those with the most power win. For this reason, halving will especially penalize small miners who already have little power, and thus will see themselves overtaken by the big players in the industry, which will become increasingly dominant.
Proof-of-Work
This is all due to Proof-of-Work (PoW), which Bitcoin shares with an increasingly limited number of altcoins, starting with Dogecoin, Litecoin and Bitcoin Cash.
As Matteo Greco points out, during the past week both LTC and BCH have increased in price, by 29% and 54%, respectively. Litecoin and Bitcoin Cash are also experiencing the halving, although at different times than Bitcoin.
According to Greco, their recent performance shows that the market is currently bullish on the halving, as it has been in past cycles.
Indeed, Litecoin has often served as a metric of sentiment on Bitcoin’s halving, as it anticipates it by almost a year.
For example, during 2015 LTC increased by 824% in the months leading up to halving, and in 2019 by 525%. Now, LTC has been trading at the highest prices since April 2022, and its next halving is scheduled for early August 2023.
Given that many altcoins are suffering instead, the strong recent rise in Litecoin’s price suggests that bullish sentiment is also increasing ahead of Bitcoin’s next halving.