Why analysts are calling the next potential Bitcoin halving “pivotal”

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Investing.com — The reward for mining Bitcoin could be cut in half as soon as April, analysts at VanEck have said, adding that the event may significantly impact the price of the world’s most popular cryptocurrency.

Bitcoin halving

Known as “halving,” the process could see the amount of Bitcoin received by participants in the blockchain network underpinning the token slashed to 3.125 from 6.25.

Halving limits the number of Bitcoin in circulation, possibly lowering fresh supply on the open market.

Roughly speaking, halving occurs about once every four years, or after the network has verified transactions on a total of 210,000 blocks. The first halving took place in November 2012, when the return from mining stood at 50 Bitcoin. Two more halvings happened in 2016 and 2020.

Eventually the reward is due to hit a mark of 0.00000001 Bitcoin, the lowest denomination of the token. Called a “satoshi,” this amount could theoretically be the reward until the proposed limit of 21 million Bitcoin in circulation is potentially reached in about 2140.

When could the next Bitcoin halving occur?

The next Bitcoin halving will likely take place around April 24 this year, Menno Martens, Crypto Specialist at VanEck told Investing.com.

Martens called the event “pivotal,” noting that prior halvings have resulted in rallies in the price of Bitcoin and the overall capitalization of the crypto market.

The first halving in 2012 saw the price of Bitcoin shoot up from around $12 to around $130 six months later, according to data from crypto exchange Binance. Following the second in 2016, it soared from $660 to around $900 in half a year. The third in May 2020: $8,600 to $15,700 by November that year.

“This historical pattern suggests the halving could lead to potential significant [price] appreciation before and after the halving event,” Martens said.

Bitcoin’s recent rally

On Wednesday, Bitcoin surpassed the $61,000 mark, extending a rally in the token into a fifth consecutive day.

By 11:26 ET (16:26 GMT), the price of Bitcoin had risen by 7.9% to $61,251.2, placing the cryptocurrency within touching distance of an all-time high of more than $68,000 reached in 2021. It has now soared by more than 16% in the past seven days.

Along with the anticipation surrounding the upcoming halving, Bitcoin’s stellar performance this year has been spurred on by a recent decision from U.S. authorities to give the green light to exchange-traded funds (ETFs) that directly track the price of the cryptocurrency. The approvals have drawn a slew of institutional capital into Bitcoin. 

“Overall, we continue to like the set-up for [Bitcoin]/Crypto and expect considerable upside in [calendar year 2024] with [Bitcoin] exiting the year at [around] $85K+ levels driven by ETF inflows outpacing available supply on exchanges,” analysts at Compass wrote in a note.

They added that possible Federal Reserve interest rate cuts in the second half of 2024 could encourage risk-taking among retail investors. Retail trading volumes have remained relatively muted despite the ETF approvals, in an indication that faith in the crypto industry may have been dented by a string of high-profile scandals and bankruptcies.

An announcement from MicroStrategy Incorporated (NASDAQ:MSTR), the biggest corporate holder of Bitcoin, that it had recently purchased 3,000 tokens for about $155 million has also supported the token.

Meanwhile, a report from digital asset manager Coinshares showed that crypto investment products saw a fourth straight week of capital inflows. Digital asset investment products were bolstered by inflows of $598 million in the week to Feb. 23, according to the report.

Bitcoin ETFs commanded the lion’s share of the inflows. Bitcoin products registered $570 million of inflows, with BlackRock’s iShares Bitcoin Trust notching $543.5 million of inflows. This largely offset sharp outflows from Grayscale Bitcoin Trust, as it grappled with a slew of new entrants to the Bitcoin ETF space.

Ambar Warrick contributed to this report.