What Bitcoin Breakdown Means for Investors

Next Bitcoin Halving is fast approaching. And even though this seismic event has happened three times before and has been baked into the Bitcoin code since its birth, again viewers will wonder: What does this mean for me?

Half is the first and most important event. Bitcoin minersOne who sees the fruit of their labor cut in half again. But it also makes sense for BTC investors – apart from the market sentiment and attention that a halving typically brings.

“Half the hype is loud and big because people hear it and that's all,” says Scott Norris, co-founder of Bitcoin miner LSJ Ops.

So what does the Bitcoin halving mean for retailers? Should they pay attention?

The Bitcoin Half: The Nuts and Bolts

After the next Bitcoin halving, which should take place in April, miners will be rewarded with 3.125 BTC for each block they complete. That's half of the current 6.25 BTC. The reason for this is to control Bitcoin inflation.

Only 21 million BTC will ever be produced, but the rate at which new coins are created slows down every four years.

The exact date of the halving is difficult to predict because it is scheduled to happen once out of 210,000 blocks mined. The rate at which new bitcoins are produced varies according to network activity.

But aside from the amount of money that BTC will reward miners with, some say this halving will be different from previous ones — simply because more people are talking about it now. Today, there is more interest in the cryptocurrency industry – especially from institutions – than ever before.

In the year A lot has happened since the last half of 2020 for Bitcoin. The value of the largest digital asset is now four times higher than it was half a year ago. The coin went on a massive bull run when it touched an all-time high of $69,044 in 2021 before falling again. Bitcoin is very common and has received large amounts of money from traditional and respected organizations.

The last three halvings have resulted in price increases following the event: Before the first half of 2012, BTC traded at $12.35. A year later, the coin's value stood at $964.

The next half day on July 9, 2016, BTC was trading at $663. Again, a year later, the price went up and the price was $2,500.

And at the last halving on May 11, 2020, the price of BTC was $8,500. A bull run followed the next year and the largest digital coin exploded to new highs the following year.

As a result, retail investors — and not just miners — should pay attention to the next halving, industry experts say. “There are more people focused on Bitcoin right now, more people building on Bitcoin now than ever before,” Bob Bodley, CEO of Ordinals marketplace Bioniq, told Decrypt.

Bodley added that the halving could lead to the “craziest bull run ever” in Bitcoin exchange-traded funds (ETFs), interest from venture capitalists and developers building on the blockchain.

Hyperbole? Perhaps, but those predictions are supported even by the likes of the British Multinational Standard Chartered. The bank's analysts expect the halving of mining rewards, plus the potential approval of the EFF, to see bitcoin hit $100,000 per coin next year.

Perhaps the biggest Bitcoin bull of all, Michael Saylor, founder of MicroStrategy, said the halving, coupled with the potential approval of several Bitcoin ETFs, could lead to more money flooding the market than ever before. And he put his money where his mouth was: MicroStrategy now holds $6.6 billion in bitcoin.

Bitcoin Halving: What Does It Mean for BTC Price?

Does that mean retail investors will rush in as the halving approaches? Bitcoin fans need no further convincing, Bodley says. They are bound to buy. But for traditional investors who have yet to venture into crypto, the game may not be clear given the risks involved.

Bitcoin is a volatile asset, and the relatively illiquid market – compared to traditional stock assets – is prone to wild fluctuations. An ETF should help stabilize things, analysts say, if it is allowed to trade and large amounts of capital will enter the market as they expect. But mom-and-pop retailers may still be hesitant given the events of the past year.

After hitting an all-time high of $69,000 in November 2021, Bitcoin has fallen dramatically. Several factors that contributed to the decline were the collapse of Terra's ecosystem, the contagion of the industry, and macroeconomic changes such as the US Federal Reserve. Increasing interest rates as inflation increases.

The digital asset hit a multi-year low of around $15,000 a year after the launch of FTX and its founder Sam Bankman-Fried.– The saga that recently reached its peak after the previous one The billionaire has been charged with several federal crimes. Lawmakers and regulators are closely scrutinizing crypto markets right now, so it's reasonable to assume that your typical Fidelity customer might be concerned about getting back into crypto.

Short of ETFs, many traditional investors can still gain exposure to Bitcoin through proxies such as publicly traded mining companies. Nishant Sharma, founder of Bitcoin mining industry PR firm Bloxbridge Consulting, told Decrypt that investors seeking exposure to mining company stocks should pay attention to metrics that describe how efficient and reliable a mining company's operations are.

“An example of such a metric is the perception of a company's hash rate, which shows how much a company is loaded. Hash size It has been used to generate bitcoins for the past month,” he said. “Checking [hash rate] Over the last year or so of the company, one can get an idea of ​​the soft aspects of the company that cannot be measured, for example, the company's foresight to plan for regulatory or environmental disruptions, etc.

Still, when it comes to how investors should consider the Bitcoin halving, not everyone is convinced that the event will necessarily have a significant impact on the price of BTC, despite how previous halvings have played out.

Scott Norris, co-founder of Bitcoin miner LSJ Ops, told Decrypt that “there is no proof that it has any impact on price.” But “it's great for motivation,” he said. “A motivational machine loves it and triggers FOMO. [fear of missing out].”

A long-time anonymous contributor to the Bitcoin privacy wallet Wasabi, who goes by the name Rafe, is half a “noticeable change,” but traditional investors who haven't gone “deep down the Bitcoin rabbit hole” will notice this more. one.

After all, the other half might be what it always was: the miners' phenomenon. With Bitcoin's hashrate at an all-time high, miners will have to work harder—and this may put some of them out of business altogether. Because of this, those who prepare the coins are the ones who keep a close eye on next year's events.

Edited by Stacy Elliott.