The Ongoing Bitcoin Halving in 2024: An Overview of Future Developments.
The Bitcoin (BTC) (1.49% increase in value) halving event, often referred to as the halvening, was apparently overlooked this year. Coincidentally, the halving on April 19 occurred when the crypto market was centered around the SEC's approval of spotted Bitcoin ETFs.
However, the significance of the 2024 Bitcoin halving event shouldn't be overlooked. Although it has already passed over a month ago, its effects will reverberate throughout the year and beyond.
It's difficult to predict what will occur next, but Bitcoin enthusiasts should pay close attention to policymakers, not just the SEC. Similar to a particular yellow metal, Bitcoin's value derives from its limited supply, and comprehending this is crucial for holding Bitcoin with conviction.
Avoid trying to predict the halving rally
To clarify, the halving event in April 2024 reduced the reward for mining a Bitcoin block from 6.25 BTC to only 3.125 BTC. This disincentivizes and, consequently, slows down Bitcoin mining activity to keep a relatively low supply of circulating tokens.
Looking back at the past three Bitcoin halvings to guess the token's price change after April's halving event might be tempting. However, due to a small sample size, such predictions are almost meaningless.
In simpler terms, don't take "Bitcoin's next move" too literally. By now, the market, which is highly efficient and forward-thinking, has likely already incorporated the anticipated positive impact of this year's Bitcoin halving.
Bitcoin reached a new all-time high around $73,000 in mid-March, which was the first time Bitcoin reached a new all-time high before a halving event. Again, the small sample size makes it impossible to draw any significant conclusions from this. Moreover, this halving was obscured and overshadowed by the news of the spot Bitcoin ETF approvals.
Despite a slight pullback from around $73,000, Bitcoin's surge since the late-2022 low of approximately $16,000 has been remarkable. Bitcoin tends to eliminate the weaker hands before starting new bull cycles, so don't be surprised if the following price movement is a pullback.
Regardless of the near term, adhere to the mantra of "time in the market, not timing the market." Additionally, know why you are invested in Bitcoin. Likely, your reason will be related to the deliberately limited supply, which is the core of the halving event.
"Digital gold" versus the dollar
Although it might not prompt the next move in Bitcoin, the U.S. dollar's trajectory will undoubtedly influence Bitcoin throughout 2024. Bitcoin's price (in the U.S., at least) is determined against the dollar, and the dollar's year-to-date surge hasn't been beneficial for Bitcoin.
What could weaken the dollar in 2024? A change in central bank policy might be the solution. Even the mere hint of imminent interest rate cuts from the Federal Reserve could depress the dollar and provide a substantial boost to Bitcoin.
As for regulators, lawmakers, and other influential figures, there's currently a bill named the Financial Innovation and Technology for the 21st Century Act, or informally known as Fit 21, making its way through Congress. If enacted, Fit 21 would enhance regulatory clarity for cryptocurrency, leading to a greater sense of legitimacy for Bitcoin.
Both central bank policy shifts and Fit 21 have game-changing potential for the Bitcoin price. These events should not overshadow Bitcoin's appeal as "digital gold," though. Similar to the limited amount of natural gold on Earth, there will only be 21 million Bitcoins ever created. Therefore, Bitcoin and gold don't just usually move inversely in relation to the U.S. dollar; they also serve as hedges against inflation's deteriorating impact on the dollar.
If the 2024 halving event reduced Bitcoin's inflation rate to below 1%, then Bitcoin could potentially be as effective an inflation hedge as gold is. In this context, Bitcoin's next move should yield to its inescapable move against the U.S. dollar. Thus, regardless of whether lawmakers and regulators help or hinder Bitcoin in the coming months, the 2024 halving's impact will be a more favorable supply/demand balance for Bitcoin -- and, perhaps, a gold-like investment if the dollar weakens.
The potential impact of the U.S. Federal Reserve considering interest rate cuts in 2024 could significantly benefit Bitcoin, as a weaker dollar often boosts the price of cryptocurrencies. Furthermore, the passage of the Financial Innovation and Technology for the 21st Century Act (Fit 21) in Congress could enhance regulatory clarity for cryptocurrencies, potentially increasing Bitcoin's legitimacy and investment appeal.
Investors should consider diversifying their portfolios by allocating some funds to Bitcoin, given its limited supply of 21 million coins. This scarcity, similar to that of gold, makes Bitcoin an attractive hedge against inflation and a potential inflation hedge if its inflation rate drops below 1% after the 2024 halving event.
(Note: The word 'money' could be included in the second sentence, but it's not explicitly necessary as the text already mentions Bitcoin and its value being determined against the US dollar.)
