Bitcoin is halved on altcoins
The growing dominance of Bitcoin (BTC) over the past 15 years shows the importance of the strategies that creator Satoshi Nakamoto devised to overcome the weaknesses of the fiat ecosystem – one of which is halving.
Nakamoto invented Bitcoin's severance system, which reduces BTC rewards over time to freeze a limited supply of 21 million BTC. Bitcoin's halving in 2024—like the previous three halvings—is poised to leave a lasting impact on Bitcoin, as well as the countless altcoin ecosystems it has helped spawn over the years.
Altcoins respond differently to the Bitcoin halving based on a number of factors, including tokenomics, value proposition, and overall contribution to financial freedom. The Bitcoin Halving 2024 will put five key dimensions of altcoins to the test – market sentiment, market value, technology stack, blockchain forks and allocation of reserves.
Changing investor sentiment
The Bitcoin market greatly influences the investment style of crypto investors. Given that Bitcoin's price has risen after each halving, investors are looking at altcoins that have the potential to rise beyond the post-halving period.
In the year Bitcoin's star price appreciation and retention in 2024 boosted investor confidence. As a result, current market sentiment suggests that many investors expect altcoin growth.
Speaking to Cointelegraph, BNB Chain's core development team echoed the market sentiment, saying, “Bitcoin's half is known for fueling market sentiment in the Web3 ecosystem.
Related: Is Bitcoin Halving The Right Time To Invest In BTC?
According to the developers of BNB, projects with strong fundamentals and innovative technologies will attract the attention of many investors during the Bitcoin halving. Altcoin projects are developing new incentive programs and campaigns to attract crypto opportunities.
“On our end, we're seeing more initiatives aimed at fostering ecosystem growth and innovation,” the team added.
Improvements in the technology stack
The Bitcoin Halves serve as a catalyst for innovation and evolution in the broader Web3 technology stack. And for altcoins, this technological advancement has been made possible by the consistent and long-standing support from the developer community. Advances in the Bitcoin network serve as blueprints for altcoin ecosystems as they accommodate increasingly faster transactions, improved service and price appreciation, and more.
Aptos Labs co-founder and CEO Mo Sheck told Cointelegraph, “The Bitcoin halving highlights the global interest in Web3. In the Aptos ecosystem and beyond, we're seeing the potential to serve millions and billions of people at web scale. DeFi, gaming and Entertainment.
The main BNB developers underlined the need to update the underlying technology to address specific market needs and improve token service and adoption. Domestic initiatives and support programs aimed at incentivizing builders will “encourage technological advancement and ecosystem growth,” ensuring the ecosystem is set up for long-term success.
Speaking to Cointelegraph, M2 CEO Stefan Kimmel explained that the crypto exchange's strategy is in line with the upcoming halving, which is set to permanently reduce Bitcoin production. Kimmel added:
“When we look at the larger landscape, we gather attention by halving it, realizing that it is part of a larger narrative. ETF mergers, quantitative easing and halving define future market trends.
Likewise, future-ready projects need to pick and choose the right upgrades in line with Bitcoin halving 2024.
Altcoin price movement
The altcoin ecosystem reflects price movements in Bitcoin. However, some tokens outperform others during the bull market. Investors manage the short-term volatility in altcoins when Bitcoin halves, hoping to add altcoins to their portfolios.
Halving has historically had an impact on Bitcoin's price volatility, repeating it throughout the altcoin market. The team added:
“Tracking data and identifying altcoins from strong fundamentals and promising growth trends is critical to profitable businesses.”
Additionally, changes in Bitcoin mining rewards and the post-halving problem may indirectly affect altcoin mining profitability, affect the behavior of miners, and affect altcoin prices.
According to Kimmel, M2 will focus on delivering strong product offerings and increasing cryptocurrency adoption and innovation, regardless of these cyclical events.
Related: ‘Bitcoin-only' buy-and-hold investment outperforms altcoins in the long run, analysis shows
Consensus-based blockchain forks
Changes associated with Bitcoin halves often pose unique challenges that require members of the altcoin ecosystem to vote to ‘make it or break it'.
Economic incentives for miners, farmers, and stakeholders combined with community conflicts and governance problems often result in soft and hard forks.
Consensus-based blockchain forks can be a solution to resolve disputes in the community. These forks can create new cryptocurrencies with modified protocols to meet the needs and preferences of certain factions in the community.
On the other hand, some communities prefer to work on an existing blockchain rather than building from scratch. For example, BNB Chain core developers revealed that they are working on BNB Beacon Chain Fusion, which is designed to make the BNB Chain ecosystem more efficient. The BNB Smart Chain (BSC) major update, BEP 336, is scheduled for June along with a mainnet hard fork.
Related: Generation Z and Millennials prefer crypto over stocks – Report
Bitcoin accumulated allocation
Investors looking for a higher return on investment (ROI) will move some of their Bitcoin holdings into various altcoins after the halving. Diversification, as an investment strategy, increases one's chances of achieving higher returns and helps spread risk across different assets.
On the flip side, altcoin projects have been found to increase their holdings of bitcoins in treasury to reduce volatility. Explaining the idea, BNB Chain core devs added:
“Altcoins with strong use cases, supportive communities, and promising growth prospects can attract a portion of bitcoin reserves, contributing to increased liquidity and trading volume in the altcoin ecosystem.”
Investors should take a ‘Do Your Own Research (DYOR)' approach when venturing into altcoin investments. Background checks on the founder and their team, audit reports and market credibility are some of the things to consider when researching new altcoin projects.
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