Is the massive surge in bitcoin just getting started this year?

Ahead of the impending “halving” of bitcoin, a modification to the token’s underlying blockchain technology intended to slow down the creation of new bitcoins, that is the question that traders of cryptocurrencies are wondering about.

Following the half of bitcoin in May 2020, the price of the cryptocurrency saw enormous price increases of over 545% a year later. Previous halvings of bitcoin occurred in 2012, 2016 and 2020.

The statistics platform CoinGecko currently projects that the next halving will take place on April 20. However, opinions on whether bitcoin would see yet another explosive climb are divided in the market this time.

The quantity of bitcoin that is accessible to miners as rewards is halved at this point, which reduces the profitability of mining and slows the creation of new coins. Some supporters of bitcoin claim that its increased scarcity adds to its value.

According to a Bitfinex analysis published on April 8, in the 12 to 14 months following this year’s halving, the price of bitcoin will rise by roughly 160%, potentially reaching an all-time high of over $15,000.

“Even before the halving, the price of bitcoin has already reached a new all-time high, making this cycle unique compared to all the others. Although this anomaly adds a degree of uncertainty to the market dynamics, it can also be seen as a positive indication, according to the report.

In November of last year, a jury found the former millionaire and creator of a now-defunct cryptocurrency exchange guilty of stealing $8 billion from FTX customers. According to the prosecution, this was one of the worst financial frauds in American history.

Among the doubters is David Mercer, CEO of LMAX Group, which runs an institutional cryptocurrency exchange: The adult market’s perspective is as follows: in 2012, 2016, 2020, a significant bull run was preceded by a halving; the evangelists will tell you that 2024 will be no different. We believe not.

The cause? According to some observers, the impact of the halving may already have been factored into the recent surge in the price of bitcoin. With investors applauding the launch of new U.S. spot bitcoin exchange-traded funds (ETFs) and placing bets on the inflow of fresh institutional capital into the asset class, bitcoin reached an all-time high of $73,803.25, and has increased by more than 60% since January 1.

According to Thomas Perfumo, head of strategy at cryptocurrency exchange Kraken, “the bitcoin ETFs brought in a tremendous amount of interest and net new flows into bitcoin preceding the halving event, whereas in the past, we’ve seen price levels right after the halving event bring in those new flows.”

Around every four years, halvings take place, although some analysts say it’s hard to count on historical precedent. 

They claim that a number of non-halving factors, such as softer monetary policy and stay-at-home retail investors spending extra money on cryptocurrencies, may have contributed to the bitcoin rise in 2020.

“Three [halvings] as a sample size is not always sufficient to draw firm conclusions. It’s also crucial to remember that additional positive developments in the sector boosted the gains, according to a letter from researchers at the crypto analytics company Kaiko.

Others, however, contend that in the year after a halving, the ETFs might merely be one of several drivers supporting the price of bitcoin. This year, a rate reduction by the US Federal Reserve is mostly anticipated, which might strengthen riskier assets like cryptocurrencies.

“You have a simultaneous influx of new money into the asset class, finally, by way of the ETF … then there’s also the Fed, indicating that they plan on easing monetary policy later this year,” said Ravi Doshi, head of markets at FalconX, a crypto prime broker.

“Assuming that inflation prints continue to stay muted, you have this recipe for significantly higher prices.”

(Adapted from USNews.com)