Bitcoin halving just occurred, and now the question is: how does it influence the future of digital currency? With many investors and analysts addressing such questions, they have become more interested in what comes next with bitcoin and the whole market.
Bitcoin halving is probably a very important event in cryptocurrency as it cancels the reward miners receive per solved block of transactions. This phenomenon happens approximately every four weeks and has usually induced a rise in Bitcoin's price. On the other hand, the destiny after the previous halving is not, in any case, clear because of the different sides involved.
While following the current halving caused by Bitcoin, investors are actively integrating market capitalization and the Bitcoin price. Do we expect to see another bull run or a relatively bearish trend forming in the stock market? However, when we turn our eyes to the future, the primary objective is to envisage the possible scenarios that may happen and the factors that will influence the evolution of Bitcoin and the market for cryptocurrencies in general.
What happened before current halving event
As we all have observed, in previous halving events, the value of bitcoin jumped to new heights; however, this time the story seems to be a little different from previous events. Bitcoin was already at its peak price before the pricing event, and the most obvious reason seems to be the introduction of spot bitcoin exchange traded funds. This phenomenon simply put the market on fire and increased digital currency demand more than ever before.
As a result, factors affecting bitcoin future prices are manipulated by the overreaction of bitcoin investors, caused by the news of spot exchange trade fund approval, raising expectations and changing buying behavior significantly, pulling the graphs to a new height. The dynamic interplay between traditional patterns and emerging market forces exemplifies the ever-evolving landscape of the cryptocurrency sphere, leaving investors intrigued by the potential implications of these developments on the future of bitcoin's market performance.
Moreover, as the market players are enjoying the changing trends of the bitcoin market, the facilitating regulations and institutional adaptation of this new dimension of future economics have further escalated bitcoin demand. Thus, the narrative of bitcoin's journey from past conventions to present-day innovations serves as a testament to the continuous evolution and adaptation of the cryptocurrency ecosystem in response to the changing tides of the financial market.
What is expected now
As Bitcoin has shown a considerable increase in prices in the last few months because of market optimism and heightened interest in Bitcoin as a market asset, now it seems that we all see a downfall in prices because this prolonged bullish trend, historically, often indicates a sudden market crash. This phenomenon occurs due to a significant number of long-term investors applying their profit-taking strategies and selling their stocks to enjoy the post-halving event profit, hence loosening the market. Nevertheless, here come seasoned investors at play in the post-halving event. They start scalping, converting the sudden rise in demand into their profits, which stabilizes the supply for long-term investors.
One more factor to consider when analyzing the impact of the current halving event on the Bitcoin market is the contrast between the monetary policies of the US Federal Reserve in 2020 compared to the last few months. During the previous halving event, the US Federal Reserve adopted a notably more relaxed monetary stance, resulting in relatively low interest rates prevailing in the economy, but in the last few months, there has been an increase in interest rates as a proactive measure to address ongoing inflation concerns, hence diverging investors from riskier investments to safe-haven assets like US Treasury bonds and other interest-bearing investments, which tend to offer more stability and predictable returns in times of economic uncertainty. However, this policy is not compatible with the shrinking US economy, and as expected, interest rates will be reversed in the near future.
Another major reason for the reduction of Bitcoin investors is the persistent rise in the cost of living experienced across various regions worldwide. This uptrend in living expenses poses a significant challenge to a considerable number of prospective investors, as it forces them to grapple with the financial strain of covering essential needs such as food, shelter, and mortgage payments. Consequently, this prevalent economic pressure eats away at individuals' available disposable income, leaving them with limited resources to allocate towards potential investments. In addition, investors may move towards inflation hedges such as gold and other precious metals. On the other hand, Bitcoin mining has also generated many jobs for miners and proven itself to be an efficient investment asset in times of declining economies.
Investors with low capital find it difficult to attain Bitcoin as their investment asset, so they look for cheaper options such as Ethereum, Tether, XRP, and Binance Coin. These alternative currencies often offer innovative features such as enhanced privacy protocols, advanced smart contract capabilities, and faster transaction speeds. Despite this fact, Bitcoin stands as a market leader because of the returns provided to investors and consistent increments in value.
Conclusion
Bitcoin halving, an important event in the young world of cryptocurrencies, took place, attracting a wave of speculation about it. The event that takes place once every four years in which a Bitcoin miner’s reward is cut in half or the supply of Bitcoin is cut to half so does the rewards related to it, however enabling the basic phenomenon of demand and supply and increasing product price. As the world of cryptocurrency is highly profitable due to its high volatility, the recent boom in the cryptocurrency market is fundamentally due to the launch of bitcoin exchange-trade products (ETFs), where investors bought more. The last boost by the US Fed has prompted investors to search for safer assets compared to equities; however, we may expect a reversal of this policy in the next six months. Mining bitcoin has benefited society in several ways, such as creating jobs and giving an investment opportunity to low-capital investors.