As the countdown to the Bitcoin halving ticks closer, analysts are engaged in intense discussions about the potential ramifications of this significant event in the crypto sector.
Notably, with just 12 days left until the halving, popular crypto analytics firm “IntoTheBlock” took to informing investors of the expected changes in Bitcoin’s supply dynamics and its potential impact on the market.
In a Friday post on X, the firm noted that the halving will reduce the Bitcoin block reward from 6.25 to 3.125 BTC per block. This adjustment is expected to substantially decrease the yearly inflation rate to approximately 0.8%, significantly reducing the influx of new Bitcoins into the market. The firm further noted that this supply decrease could alleviate sell pressure, resulting in a more balanced market equilibrium.
Moreover, on-chain data revealed that despite the reduction in block rewards, miner revenue in USD has reached an all-time high. The analysts attributed this surge to the remarkable appreciation of Bitcoin’s value last quarter, which has offset the impact of the lower emission rate. They further emphasized that the profitability for miners to secure the network remains intact, underscoring the resilience of Bitcoin’s mining ecosystem.
Additionally, analysts can observe distinct patterns in Bitcoin’s price movements by analysing historical data surrounding previous halving events. Specifically, they pointed out how Bitcoin’s price has consistently shown an upward trend following each halving due to escalating market demand and the reduced rate of new Bitcoin issuance. However, they expected this year’s post-halving surge to be less than it has historically been witnessed.
“The percentage increase in price post-halving diminishes over time. For instance, Bitcoin’s value surged from $13 to $652 after the first halving, marking a staggering 4,802% return. However, this rate of increase has declined with subsequent halvings. It is reasonable to assume that future percentage increases are likely to continue decreasing,” the analysts argued.
Meanwhile, a report by CoinGecko earlier this week resonated with the analysis from IntoTheBlock, revealing that the upcoming bullish cycle might yield diminished returns.
Notably, Bitcoin’s halving serves as a powerful inflation-dampening mechanism, setting it apart from fiat currencies with volatile inflation rates influenced by central banks’ actions. Every four years, the reward for miners securing and processing Bitcoin transactions is reduced by half, resulting in a diminished supply inflow of new BTC. Consequently, the value of existing Bitcoin increases attractiveness as its supply becomes scarcer.
An impressive 93.3% of the total Bitcoin supply has been mined, equating to 19.6 million BTC out of the 21 million BTC total. According to CoinGecko’s analysis, given an inflation rate of approximately 1.74%, Bitcoin’s price is poised to ascend should demand outstrip its current inflation rate.
That said, amidst these ongoing discussions, Bitcoin exhibited remarkable resilience towards the weekend, surging late Friday following a brief dip earlier in the day to $66,145. Renowned crypto analyst Rekt Capital labelled the recent Bitcoin dip as a “pre-halving retrace” with a temporary price downturn. According to the pundit, this dip lays the groundwork for the subsequent re-accumulation phase before a bullish breakout.
BTC traded at $62,727 at press time, reflecting a 5.58% drop over the past 24 hours.