Bitcoin has completed another "halving".
At 8:09 a.m. on April 20, 2024, Beijing time, Bitcoin successfully completed the fourth halving at block height 840,000, and the mining reward of the Bitcoin network was halved from 6.25 BTC (Bitcoin) to 3.125 BTC.
The Bitcoin halving event is often seen as a positive factor driving the Bitcoin bull run. However, for this Bitcoin halving, JPMorgan Chase's analyst team made a prediction that the price of Bitcoin may plummet after the halving based on several factors such as the cost of miners after the halving, the number of open interest in current futures, and the horizontal comparison between Bitcoin and gold.
Judging from the price trend of the currency after the first three Bitcoin halvings, the currency price did not increase significantly in the short term, but in the long run, it promoted the rise of the currency price. According to the experts interviewed, Bitcoin halving events usually have a positive impact on the price, as this mechanism theoretically increases the scarcity of bitcoin by reducing the speed at which new bitcoins are supplied. The market may not react much to the halving initially, and over time, the reduction in the supply of new bitcoins may gradually manifest itself in the market price.
Halving of the fourth degree
Bitcoin halving refers to the halving of rewards for "mining" Bitcoin transactions to ensure their scarcity, value preservation, and long-term sustainability as a digital currency.
According to the design of the Bitcoin protocol, the halving event occurs approximately every 210,000 blocks mined, with an interval of about four years. Since its inception in 2009, Bitcoin has successfully completed four halvings.
The first halving took place on November 28, 2012, when the Bitcoin network's mining rewards were reduced from 50 BTC to 25 BTC. On the day of the halving, the price of Bitcoin was only $12.3, and then rose to $1,217 on November 30, 2013, which became the highest price of Bitcoin after the first halving.
The second halving took place on July 9, 2016, when the Bitcoin block reward was further reduced from 25 BTC to 12.5 BTC. The price of Bitcoin on the day of the halving was $648.1 per coin, and during this period, the peak price of Bitcoin reached $19,800.
The third halving took place on May 11, 2020, when the block reward was reduced from 12.5 BTC to 6.25 BTC. At the time of the halving, Bitcoin was trading at $8,560.6 per coin, and during the period, the price climbed to a high of $67,775.3.
The fourth halving occurred at 8:09 on April 20, 2024, when Bitcoin was at block height 840,000 and the mining reward was halved from 6.25 BTC to 3.125 BTC. After the price of bitcoin experienced a sharp drop before the halving, as of press time, the price of the coin returned to $66,000 per coin.
"From the above data, it can be seen that the price of Bitcoin did not immediately adjust significantly after each halving, and it took a year or more for its price to adjust. Therefore, it may be difficult to clarify whether the subsequent price adjustment was due to the halving or other factors. Gao Chengshi, executive member of the Blockchain Special Committee of the China Computer Federation, pointed out to reporters that although Bitcoin has been halved, the number of bitcoins flowing into the market is still increasing, but the speed of increase has slowed down and the number has become smaller, which is one of the reasons why the price of Bitcoin has not been adjusted immediately after each round of halving.
Yu Jianing, co-chairman of the Blockchain Special Committee of the China Communications Industry Association, also told reporters that in the short term, the market's reaction to the Bitcoin halving may show high volatility. As the halving event has been widely anticipated by the market, investor sentiment and market activity may fluctuate significantly around the time of the halving. On the one hand, the halving event may be interpreted by the market as a signal of reduced supply, triggering expectations of an increase in the price of Bitcoin. This expectation may have driven the price up before the halving, leading to a certain degree of "buy the expectation, sell the fact" phenomenon in the market. On the other hand, since the halving directly affects the earnings of miners, if some miners exit the market due to reduced profits, it may have an impact on the network's hash rate (hashrate, a unit of measurement of the processing power of the Bitcoin network) in the short term, which in turn affects market confidence.
Institutions are bearish
Although after the first three halving events, the price of Bitcoin has experienced varying degrees of increase in the long run. However, for this halving event, JPMorgan's team of analysts expects that the price of bitcoin will not rise after the halving, but will fall after the halving.
The reasons given by JPMorgan's analyst team can be summarized in three ways: first, the market may have already priced in the price in advance, resulting in the overbought phenomenon of bitcoin before the halving, second, the sluggish risk capital financing, which may indicate a lack of confidence in the long-term growth potential of digital assets, and third, the reduced return of bitcoin mining after the halving, which may affect the mining motivation of miners, which in turn affects the computing power and security of the network.
Gao Chengshi believes that there should be corresponding room for upward adjustment of Bitcoin after the halving, and the room for price upward adjustment may be relatively large, because Bitcoin has an increasingly extensive and stronger consensus in the current unstable and uneven world. The Bitcoin spot, futures and options, and spot ETFs launched by major countries and regions in the world provide convenient channels for Bitcoin and related derivatives trading. These factors make it possible for bitcoin to move further upwards in the long term.
"Bitcoin has become an important category in asset allocation and financial market trading, and investing in Bitcoin requires giving up short-term thinking and paying more attention to its long-term development and changes. Gao Chengshi suggested that investors should make appropriate investment ratios according to their own risk tolerance, and at the same time, they also need to pay close attention to the changes in the price of Bitcoin and conduct in-depth research on the relevant changes in the factors that affect the price of Bitcoin.
"In the long run, Bitcoin halving events usually have a positive impact on the price. Yu Jianing expects that the market may not react much to the halving initially, and that the reduction in the supply of new bitcoins may gradually be reflected in the market price over time. In addition, the increasing maturity of the Bitcoin market, with the participation of more institutional investors and large financial entities, may also enhance the stability and resilience of the market.
Yu Jianing believes that investors should consider including Bitcoin in a diversified portfolio to diversify their risks. Due to Bitcoin's low correlation with traditional asset classes, it can serve as an effective diversifier in a portfolio. Investors should conduct in-depth research on market dynamics, allocate assets reasonably according to their own risk tolerance and investment objectives, and continue to pay attention to changes in the market and relevant policies to make informed investment decisions.