Lately, there’s been a noticeable influx of big names stepping into the world of crypto. Halving events often spark interest from these institutional investors. They view Bitcoin as a shield against the uncertainties of conventional finance. Should a larger number of institutions begin embracing Bitcoin, it might drive the prices upward. Each time Bitcoin undergoes a halving, it’s like a unique chapter in its story, mixing the usual trends with fresh surprises. This year’s halving, especially with the recent introduction of Bitcoin exchange-traded funds (ETFs), could shake things up. Those ETFs had a massive impact on boosting Bitcoin’s worth to new levels. Now, everyone’s wondering: will the 2024 halving lure in even more heavyweight investors to the crypto world?
What is BTC Halving?
Bitcoin halving is like a scheduled celebration that occurs roughly once every four years. During this time, miners receive smaller rewards for their dedication and effort. This alteration directly impacts the rate at which new Bitcoins are generated, gradually making them more unique and precious as time passes. These halving events ensure that there will only be a limited supply of Bitcoins in the crypto landscape, adding to their allure and value.
When Bitcoin first started, miners would get a whopping 50 BTC for each block they processed. But then came the halvings, and that reward got cut in half each time. These halvings happen roughly every four years or after about 210,000 blocks have been processed. The first halving took place back in 2012, dropping the reward to 25 BTC. Then in 2016, it halved again to 12.5 BTC. And most recently, in April 2024, it dropped even further to just 3.125 BTC per block.
Bitcoin Halving and Institutional Market Dynamics
As we look back at past halving events, they can give us a clue about what to expect, but this next halving is shaping up to be quite different. The big change? Well, professional investors have entered the world of crypto. It’s the first time we’re seeing major players like private wealth managers and big financial institutions diving into digital assets as part of their investment strategies. This shift is quite impactful in the industry, suggesting that the results of this halving might break away from the usual patterns we’ve observed in the past.
According to a recent study from 21Shares, a trailblazer in crypto ETPs in Europe, this upcoming halving is happening in a market setting that’s never been seen in the digital asset world. The researchers pointed out that the impact of halving events has been gradually tapering off over time, with each new event leading to a slower growth rate in the value of Bitcoin. For instance, following the first halving, Bitcoin surged by approximately 5,500% over four years and then by about 1,250% in the cycle after the second halving.
One factor contributing to the unique nature of the current cycle is the introduction of crypto exchange-traded products (ETPs). BTC spot ETFs have seen remarkable trading volumes, indicating strong interest from traditional investors. ETFs recorded over $1 billion in inflows in a single day in March 2024.
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Bitcoin Halving and Institutional Traders
With big institutions getting involved in Bitcoin, regular investors are starting to act differently. More and more, those who hold onto Bitcoin for the long haul are gaining significance, and there’s noticeably less Bitcoin circulating on exchanges compared to the last five years. Researchers speculate that if this trend persists, the availability of Bitcoin for buying and selling might dwindle, potentially triggering a scarcity and rapid price surge. While experts in the crypto field remain optimistic about Bitcoin’s future, they acknowledge that the current landscape of Bitcoin trading differs significantly from past practices.
Professional investors are poised to increase their involvement in the market. Unlike what we’ve seen before during halvings, where Bitcoin prices dropped soon after hitting new highs, this time around, the selling pressure might not be as strong thanks to these new investors entering the scene.
Conclusion
As these new investors bring their significant capital into the fold, they will also come with a heightened understanding of the risks associated with unregulated and untested platforms. This time around, professional investors will prioritize partnering with platforms that have the right credentials. This emphasis allows them to focus on managing their investment portfolios without worrying about operational and technological risks.
Additionally, with the increasing integration of digital assets into alternative portfolios, platforms that seamlessly blend with traditional financial services will gain a competitive edge. These platforms offer features like managing digital assets alongside traditional ones and providing access to tokenized investment opportunities. Professional investors find such platforms more appealing and trustworthy, leading the market ecosystem to move in this direction.
Considering these factors, the fourth Bitcoin halving is expected to bring in more institutional investors. It signifies a transformative shift in the digital asset industry, evolving into a trusted and professionally managed ecosystem.
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Disclaimer: Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. Each investor must do his/her own research or seek independent advice if necessary before initiating any transactions in crypto products and NFTs. The views, thoughts, and opinions expressed in the article belong solely to the author, and not to ZebPay or the author’s employer or other groups or individuals. ZebPay shall not be held liable for any acts or omissions, or losses incurred by the investors. ZebPay has not received any compensation in cash or kind for the above article and the article is provided “as is”, with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information.
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