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Investing.com – Bitcoin mining rewards could be halved as early as April, analysts at VanEck say, adding that the event could have a significant impact on the price of the world’s most popular cryptocurrency.
Bitcoin halving
The process, known as “halving,” could see the amount of Bitcoin received by participants in the blockchain network that underlies the token drop from 6.25 to 3.125.
The halving will limit the number of Bitcoin in circulation, potentially leading to a decline in fresh supply on the open market.
Roughly speaking, the halving occurs approximately every four years or after the network has verified transactions for a total of 210,000 blocks. The first halving took place in November 2012, when the yield from mining was 50 Bitcoin. Two more halvings occurred in 2016 and 2020.
Ultimately, the reward is expected to reach 0.00000001 Bitcoin, the lowest denomination of the token. This amount, known as “Satoshi,” could theoretically be the reward until the proposed limit of 21 million Bitcoins in circulation is reached, possibly in 2140.
When could the next Bitcoin halving happen?
The next Bitcoin halving is expected to take place around April 24 this year, Menno Martens, crypto specialist at VanEck, told Investing.com.
Martens called the event “pivotal,” noting that previous halvings have led to an increase in the price of Bitcoin and the overall capitalization of the crypto market.
During the first halving in 2012, the price of Bitcoin shot up from about $12 to about $130 six months later, according to data from crypto exchange Binance. After the second one in 2016, it rose from $660 to around $900 within half a year. The third in May 2020: $8,600 to $15,700 by November this year.
“This historical pattern suggests that the halving could lead to potentially significant impacts.” [price] Appreciation before and after the halving,” Martens said.
Bitcoin’s recent rally
It surpassed $61,000 on Wednesday, extending the token’s rally to the fifth straight day.
As of 11:26 a.m. ET (16:26 GMT), Bitcoin’s price was up 7.9% at $61,251.2, putting the cryptocurrency within touching distance of its 2021 all-time high of more than $68,000 . Now the price has risen even further, up 16% in the last seven days.
In addition to anticipation of the upcoming halving, Bitcoin’s stellar performance this year has been spurred by a recent decision by US authorities to greenlight exchange-traded funds (ETFs) that directly track the price of the cryptocurrency. The approvals have attracted a lot of institutional capital into Bitcoin.
“Overall we continue to like the setup [Bitcoin]/Crypto and expect significant upside potential [calendar year 2024] with [Bitcoin] at the end of the year [around] A level above $85,000 will be caused by ETF inflows exceeding the available supply on exchanges,” Compass analysts wrote in a note.
They added that possible interest rate cuts by the Federal Reserve in the second half of 2024 could encourage risk appetite among retail investors. Retail trading volumes remained relatively low despite the ETF approvals, suggesting that confidence in the crypto industry may have been weakened by a series of high-profile scandals and bankruptcies.
An announcement from MicroStrategy Incorporated (NASDAQ:), Bitcoin’s largest corporate holder, that it recently purchased 3,000 tokens for approximately $155 million also provided support for the token.
Meanwhile, a report from digital asset manager Coinshares showed that crypto investment products recorded capital inflows for the fourth week in a row. According to the report, digital asset investment products were boosted by $598 million in inflows in the week ended February 23.
Bitcoin ETFs accounted for the lion’s share of inflows. Bitcoin products saw $570 million in inflows, with BlackRock’s iShares Bitcoin Trust seeing $543.5 million in inflows. This largely offset Grayscale Bitcoin Trust’s heavy outflows as the company struggled with a number of new entrants into the Bitcoin ETF space.
Ambar Warrick contributed to this report.
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