As Bitcoin's fourth halving approaches, estimated to occur around 9 p.m. ET today, industry experts are divided on the potential impact the event could have on the cryptocurrency's price. The halving, which will reduce the block subsidy reward for miners from 6.25 BTC to 3.125 BTC, has historically been associated with significant price fluctuations, often preceding substantial bull runs in the bitcoin market.
Binance CEO Richard Teng noted that "Historically, bitcoin has experienced notable price increases in the six months following each halving event. In fact, bitcoin reached new all-time highs in each four-year period between the previous halving events." However, the question remains whether this time will be different, given the changing market dynamics and increased institutional participation.
Some analysts, such as those at JPMorgan, argue that the halving has already been priced in, citing factors like bitcoin's overbought conditions and its current price being well above the bank's volatility-adjusted price of $45,000 compared to gold. On the other hand, John Glover, a former Managing Director at Barclays Bank and current CIO at crypto lending platform Ledn, believes that the reduction in new supply will take time to impact the market, advising market participants to be patient.
One key differentiating factor in this halving cycle is the increased institutional engagement, particularly through the recently launched spot bitcoin exchange-traded funds (ETFs) in the U.S. "Institutions have not just entered the market, they are now shaping its trajectory, bringing with them a new level of credibility, stability, and interest from mainstream finance," said Alex Cable, Chainalysis WEMEA Area VP.
The spot bitcoin ETFs have generated more than $12 billion in combined net inflows over the past few months, although flows have slowed in the run-up to the halving. Scott Shapiro, Senior Product Director at Coinbase, believes that "Spot bitcoin ETFs have reshaped bitcoin's market structure going into the halving by establishing a new anchor for BTC demand."
Despite the varying opinions on the halving's immediate impact, many experts remain bullish on bitcoin's long-term prospects. Noelle Acheson, bitcoin analyst and author of the Crypto is Macro Now newsletter, cited historical data suggesting that bitcoin could reach prices ranging from $270,000 to $1.8 million within a year of the halving, depending on the cycle's performance.
Duncan Ash, head of strategy at Coincover, expects the halving to put supply and demand slightly out of kilter in the short term, driving market pressure as more investors seek to get a piece of the pie. However, he believes that in the mid to long term, the industry will emerge with more users, a higher market cap, and greater liquidity, leading to a stabilizing effect on the market.
The changing industry economics, with miners preparing for a future where transaction fees become their primary source of income, add another layer of complexity to the halving's potential impact. Protocols like ordinals, runes, and BRC-20 have already pushed up transaction fees as miners adapt to the evolving landscape.
As the bitcoin halving draws near, the cryptocurrency community and market participants eagerly await the event's outcome. While opinions vary on the immediate price impact, the consensus seems to be that the halving, combined with increased institutional adoption and the maturation of the bitcoin market, will play a significant role in shaping the cryptocurrency's future trajectory.
