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The Aftermath – Forbes Australia Consultant
On April 20, 2024, at 10:09 am, the fourth bitcoin halving took place. While some die-hard fans may have stayed up late or woken up early to watch bitcoin block ticks above 840,000, the halving itself is, at least initially, a non-event for most investors. The immediate impact of the halving is felt primarily by bitcoin miners, who see their block rewards halved, affecting their profitability and potentially leading to changes in the mining sector.
As the rate at which new bitcoins enter circulation is reduced by 50%, the scarcity of the asset increases. This inherent deflationary mechanism creates potential long-term upward pressure price of bitcoin. However, the relationship between halving events and price appreciation is not always simple and can be influenced by various market factors.
“Bitcoin trading volume generally sees the most significant increase in the 60 days leading up to halvings, as interest rises and prices gain momentum,” market analyst at trading platform Stake, Megan Stals, tells Forbes Advisor .
“…This has happened again, with cryptocurrency exchange data showing a notable increase in volume in March compared to February, as investors seek more exposure.”
On April 12, one week after the halving, one BTC was worth 107,302 Australian dollars. On April 22, a few days after the event, the price was slightly lower at around AU$100,000.
However, Stals also highlights the challenges that miners, particularly smaller operations, will face following the halving.
“Miners are facing a decline in profitability (post-halving), due to the increased computing power and energy needed to mint new coins,” Stals says.
“Larger miners should have the resources to invest in new hardware and find more efficient energy sources, but each halving event makes it harder for smaller miners to stay in business.”
Despite the growing pains for miners, Stals notes that market dynamics play a crucial role in miners’ profitability. Rising bitcoin prices could help offset some of the additional mining costs in the short term. However, he adds that “investing in new hardware and finding efficient energy sources are critical to their long-term success.”
Stals cites another potential benefit for the recent halving: 11th place approval bitcoin exchange-traded funds (ETFs) by the U.S. Securities and Exchange Commission (SEC) in January. These ETFs have made it easier for investors to gain exposure to bitcoin without the need to navigate cryptocurrency exchanges.
“Bitcoin ETFs have proven more popular among older investors in Stake, particularly those aged 45 and older,” he says.
“…While younger investors may already have direct exposure to bitcoin through cryptocurrency exchanges, these ETFs offer a solution to older investors who are interested in the space but are not willing to tackle cryptocurrency exchanges and complexity of private keys and wallets.”
However, Stals says bitcoin is sensitive to higher interest rates, so investors need to take that into account as well.
“There are still concerns that the US has not yet successfully tamed inflation, and traders have started to reduce their expectations for rate cuts in 2024,” he says.
Consumer price index data from the United States for April came in higher than expected inflation over the last 12 months it stood at 3.8%, dampening expectations that any interest rate cuts would take effect in the first half of the year. On the day of the news, cryptocurrency markets were in the red.