Bitcoin halving: what to expect as BTC surges past $70,000

With just 7 days remaining until the highly anticipated halving event, Bitcoin (BTC) has clawed back the psychological threshold of $70,000, reinforcing bullish long-term forecasts from market analysts. Earlier this week, it briefly dipped to local lows of $67,482 following the release of the US Consumer Price Index (CPI) for March, which showed a year-on-year increase of 3.5%, sparking concerns about potential delays in Federal Reserve interest rate cuts. This bounce may at least partly be attributed to Bitcoin whales 'buying the dip' and bolstering their holdings ahead of the reduction in supply. 

This show of strength from the world's first cryptocurrency amidst macroeconomic headwinds has buoyed the bullish sentiment among analysts and investors ahead of the halving event, when the block rewards for Bitcoin miners will be cut in half, reducing the influx of Bitcoin into the market and lowering supply just when demand dances around an all-time-high price. Let's take a look at the halving date, current predictions, and factors that could affect Bitcoin in the halving and beyond.

When is Bitcoin halving 2024?

The Bitcoin halving event, sometimes jokingly referred to as the 'halvening' in crypto slang, is currently estimated to take place between 18 and 20 April. 

The exact day cannot be precisely determined until closer to the event because the occurrence of the Bitcoin halving is determined by block height rather than a specific date. The halving event takes place every 210,000 blocks. In the case of the 2024 halving, it will occur precisely at block 840,000, reducing mining rewards to 3.125 Bitcoin per block. This reduction marks a significant decrease from the previous reward of 6.25 Bitcoin per block following the last halving event in May 2020. The pre-programmed halving has been part of Bitcoin since its conception by the pseudonymous Satoshi Nakamoto as a feature to help regulate the total supply of Bitcoins, which has a maximum cap of 21 million. This gives Bitcoin a built-in scarcity, somewhat similar to finite assets such as oil or gold.

As of the current moment, there are approximately 19,673,868 Bitcoins in circulation, bringing them close to their maximum supply. However, due to the ongoing reduction in distribution to miners by 50% every four years, it is projected that the 21 millionth Bitcoin will not be mined until the year 2140.

This gradual decrease in supply is believed by some experts to have played a crucial role in fueling Bitcoin's exponential price surges following halving events. The repetitive nature of this technological foundation has established a predictable pattern for crypto investors to navigate amidst the broader landscape of volatility in the crypto market.

How will halving affect the price of Bitcoin in 2024?

Halving events have historically been associated with periods of price appreciation for Bitcoin. After the 2012 halving event, for instance, during which the BTC awarded to miners dropped from 50 to 25, Bitcoin surged in 2013 from an initial price of $13.30 to a remarkable (for the time) peak of $1,238—imagine if traders back then could have known about 2024's high!

Similarly, following the halving event in the middle of 2016, Bitcoin started out 2017 at just below $1,000. By December 16, 2017, BTC had reached $19,345, marking its highest value until November 2021.

While there are indications that the magnitude of Bitcoin's post-halving surges has been diminishing with each halving event, they still present opportunities for traders to realise gains.

On the flip side, each new peak subsequent to a halving event is typically trailed by a "crypto winter," characterised by an extended period during which Bitcoin and other cryptocurrencies undergo significant devaluation, underscoring the importance of timing when it comes to making trades and investments around the halving.

This supply shock phenomenon tends to drive prices upwards, but it also increases the cost and difficulty of mining new Bitcoins. Combined with higher processing power requirements, this could lead to a shakeout among Bitcoin miners as profit margins narrow. 

Bitcoin price predictions for the halving

Bitcoin hit a new all-time high of $73,798 on 14 March, surpassing its previous peak of $68,990 set in November 2021. In terms of growth, Bitcoin rebounded approximately 157% in 2023 and has surged about 70% so far this year, with significant gains seen in February and March. Recent reports from industry research firms and analysts have been bullish on Bitcoin around the halving event, predicting a price peak exceeding $150,000.

Geoff Kendrick, an analyst at Standard Chartered, also predicts that the cryptocurrency could soar to $200,000 in the coming year. Bernstein strategists have similarly revised their projections, forecasting a valuation of $150,000 by 2025.

Venture capitalist Tim Draper predicts that Bitcoin will triple in value in 2024, reaching $250,000 by the end of the year. Speaking to Cointelegraph during Paris Bitcoin week, Draper advised investors not to underestimate the impact of the halving event, stating that it typically leads to a decrease in supply, an increase in demand, and subsequently, a rise in price. He recommended having a single-digit percentage exposure to Bitcoin as a means of hedging against concerns over bank failures and currency devaluation. 

One metric that sheds some light on Bitcoin's consistent performance following halving events, is the asset's stock-to-flow (S2F) chart, which tracks BTC's relative performance throughout its halving cycle. Typically, Bitcoin reaches cyclical peaks when it's approximately 800 days away from its next halving event, positioning it around the midpoint of its post-halving trajectory.

Bitcoin's adherence to its stock-to-flow model has been noteworthy, especially considering the volatility of the crypto market. While correlations may have faltered in 2022, it's essential to consider the broader economic challenges such as the post-pandemic recovery, disruptions in supply chains, geopolitical tensions, and historically high inflation rates at that time.

With the S2F model suggesting a peak surpassing $440,000 by May 2025, the possibility of history repeating itself is likely to be welcomed by crypto enthusiasts.

However, there are lingering doubts about the sustainability of such a substantial halving rally, particularly with the perceived impact of halving events potentially diminishing. Analysts caution that there is more accumulated selling pressure compared to previous cycles, particularly as Bitcoin reached a new all-time high before the halving for the first time in cryptocurrency history. This surge in selling pressure is attributed to 1.87 million BTC, equivalent to 9.5% of the circulating supply, being purchased above the $60,000 mark.

The role of US inflation and debt

Analysts have warned about potential sharp declines in Bitcoin prices during the halving period are anticipated due to the Federal Reserve's quantitative tightening, which is draining liquidity from markets, suggesting that it could contribute to a significant downturn in crypto asset prices. However, Bitcoin’s recent rebound suggests that the asset can successfully resist such macroeconomic pressures.

Bitcoin experienced a brief dip to $67,500 on Wednesday following higher-than-expected US inflation data for March, which sparked fear in the market about the potential impact on interest rate cuts. But Bitcoin quickly recovered from this knee-jerk reaction, surpassing its previous level to recover past $70,000. Despite the initial drop, Bitcoin outperformed US equities and gold, both of which saw significant declines for the day.

QCP Capital, a digital asset hedge fund, observed that the rebound demonstrated the enduring interest in bitcoin, as investors viewed temporary dips as opportunities to buy. According to a Telegram update from QCP, "This bounce is not unexpected as the desk continues to witness robust demand for long-dated BTC calls even amidst this downturn. It reflects a deep-seated bullish sentiment towards BTC."

Grayscale's managing director of research, Zach Pandl, predicts that Bitcoin will remain in high demand as the US government continues to overspend and maintain high interest rates. He anticipates that persistent inflation and unsustainable budget deficits will drive interest in store-of-value assets like Bitcoin. Despite short-term concerns about inflation hindering the Federal Reserve's ability to lower interest rates, Pandl believes events like the upcoming Bitcoin halving and increasing crypto adoption will support Bitcoin's price. However, he acknowledges that a rise in real interest rates could pose a short-term negative for crypto but expects continued demand for store-of-value assets over the longer term. Historical data shows a correlation between spikes in the 10-year real interest rate and declines in Bitcoin's price. 

Reflexivity Research co-founder Will Clemente highlighted in a post on X that the escalating US debt levels carry more significance for the broader context than individual CPI figures. He suggested that policymakers might allow inflation to exceed the 2% target to mitigate the debt burden. Clemente emphasised that "Bitcoin serves as protection against this scenario."

How will Bitcoin spot ETFs respond to the halving?

The inflows from United States spot Bitcoin exchange-traded funds (ETFs) have played a substantial role in Bitcoin's price rally. These ETFs have accumulated over 841,900 BTC, representing 4.28% of Bitcoin's circulating supply, since their inception. Recent data indicates that Bitcoin ETFs amassed over $500 million worth of net inflows last week alone, signaling continued investor interest in the cryptocurrency market.

Bitcoin ETF launches in January brought increased market liquidity and accessibility, allowing a wider range of investors to participate in bitcoin markets. Although this democratization of access created a headwind for Bitcoin prices initially, a Bitcoin rally this year could present buying opportunities for BTC miner stocks.

BlackRock's iShares Bitcoin Trust has emerged as the frontrunner in terms of fund inflows, attracting approximately $14.78 billion in inflows as of 8 April. However, Grayscale remains the leader in terms of assets under management, boasting $32.93 billion, followed by iShares Bitcoin Trust at $17.89 billion. Despite recent outflows from the Grayscale Bitcoin Trust, spot Bitcoin ETFs have collectively attracted nearly $13.8 billion in inflows since their launch.

Issuers of Bitcoin ETFs are expected to adjust their buying and selling activities to align with Bitcoin's price movements. Typically, these ETF issuers only transfer funds during trading periods, buying or selling Bitcoin with the aim of balancing demand and maintaining market price alignment with underlying net asset value.

Spot Bitcoin ETFs witnessed a surge in activity throughout February and peaked in mid-March, coinciding with Bitcoin's record high. Collectively, these ETFs are trading well above their launch-day prices in January. If the halving does drive up Bitcoin prices as predicted, spot ETFs can be expected to follow suit, acting as an additional catalyst to fuel bullish momentum.

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