Bitcoin’s Halving 2024 Is Over – What Does It Mean? 

The Bitcoin blockchain protocol has been designed to automatically halve the rewards of its miners once 210,000 Bitcoins have been minted. This occurs every four years. This time around, the reward was halved to 3.25 Bitcoins per mined block. As the miners on average mine 144 blocks per day, the daily supply of new Bitcoins was cut in half to roughly 450 coins.

Does this mean that the Bitcoin halving increases its price?

 “Historically, halvings have led to major market rallies by cutting the supply of new Bitcoins, thus potentially increasing prices due to higher demand,” the crypto analytics firm Glassnode notes.

Many crypto profiles point toward the strong price development following the three previous halvings: +1,000 percent after its first halving in 2012, +200 percent after its second halving in 2016 and +600 percent after its third halving in 2020. But as every savvy investor knows, past performance is no guarantee of future returns, like after the 2024 Bitcoin halving…

“However, this time, the dynamics are further complicated by heavy institutional involvement through (the launch of Bitcoin exchange traded funds) ETFs and notable shifts in the activities of long-term investors,” Glassnode adds.

JP Morgan, for example, does “not expect Bitcoin price increases post halving as it has been already priced in. In fact, we see downside for the Bitcoin price post halving [to $42,000] for several reasons,” such as Bitcoin remaining overbought. However, Deutsche Bank expects prices to “stay high due to expectations of future spot ether (ETH) ETF approvals; future central bank rate cuts; and regulatory changes” but does “not expect them to increase significantly.” As for Bitwise, it noted that returns have been higher post-halving than pre-halving in each of the three historical examples that we have.

Price volatility should decrease

The price volatility of Bitcoin should decrease over the coming years. The crypto ETFs that have been launched (or will be launched) have brought in institutional interest. “These investors (institutions, family offices, financial advisors) act differently than the retail investors who have dominated Bitcoin to this point. On average, institutional investors are more likely than retail investors to rebalance their portfolios (selling high, buying low) and to make steady drip investments into the market (monthly, quarterly, etc.). This introduces countercyclical flows which could dampen volatility,” the Chief Investment Officer of Bitwise, Matt Hougan, said.

 Less volatility should attract investors, so a typical Bitcoin allocation in a portfolio could well reach 5 percent, he notes, adding “even central banks could start to accumulate Bitcoins.”

Bitcoin at $250,000 by the next halving?

Declining price volatility, more sophisticated custody options, low correlations to stocks, ease of access through ETFs, and greater institutional adoption are factors likely to support the price of Bitcoin over the next four years, Hougan said.

“With the ETFs launched and gathering assets—and major Wall Street firms lining up behind bitcoin—I suspect the asset will continue to move further into the mainstream. At $250,000, bitcoin would be a $5 trillion asset. Could it go higher? Of course. But $250,000 would represent solid progress between halvings, and I think we’ll see at least that,” Hougan forecasts.

 If the current withdrawal rate remains unchanged at roughly 7,000 Bitcoins per day, there will be a shortage of Bitcoin reserves on the world’s crypto exchanges by the end of 2024.

“The rapid depletion of Bitcoin reserves is preparing the market for a possible liquidity crisis. As reserves dwindle, the market’s ability to absorb large sell orders without impacting the price weakens. The surge in institutional interest has stabilized and drastically increased demand for Bitcoin. This increase is likely to exacerbate the shortage and push prices higher after the halving,” Alex Greene, a senior analyst at Blockchain Insights forecasts.

Goldman Sachs echoes the above reasoning stating Bitcoin’s future price performance will be driven by the supply-demand dynamic, as well as the continued demand for Bitcoin ETFs. Time will tell which of these predictions will come true.