Bitcoin’s price dropped below $60,000 after the fourth halving, with some traders anticipating a further drop as low as $47,000. As the first Asia's spot Bitcoin ETF debuted in Hong Kong and the launch of the Runes protocol could not help BTC, let’s step back a bit and rediscover the impact of Bitcoin halving on BTC.

Highlights:

Bitcoin tumbled below $60,000; a deeper fall is expected.
Historical data suggests Bitcoin tends to enter a long-term bull market after halving.
A maximum total supply of 21 million coins generates a long-term scarcity of BTC.
More use cases and derivatives of Bitcoin should be included when considering the BTC outlook.

What Is Bitcoin Halving?

Bitcoin halving is a part of Bitcoin's monetary policy that takes place approximately every four years. During a Bitcoin halving, the rewards given to miners for validating and adding new blocks to the blockchain are cut in half.

Bitcoin halving is a pre-programmed adjustment in the Bitcoin protocol that reduces the rate at which new Bitcoins are created and introduced into circulation. The reduction in block rewards has a significant impact on the rate of Bitcoin issuance, as it controls the supply of new Bitcoins and gradually decreases the rate at which they enter the market.

Bitcoin halving ensures a limited supply of Bitcoin, with a maximum total supply of 21 million coins.

Bitcoin Halving: A Historical Look

We can see certain patterns in the BTC price when looking back at the previous three halvings.

First halving (November 28, 2012): The first halving saw Bitcoin's block reward reduced from 50 BTC to 25 BTC. In the months leading up to the event, the price experienced a significant rally, reaching a peak of around $12.

After the halving, the price experienced a short-term correction, followed by a period of consolidation. However, in the following months and years, the price entered a long-term bullish trend. By late 2013, Bitcoin spiked at an all-time high at that time of $1,000.

Second halving (July 9, 2016): The second halving reduced the block reward from 25 BTC to 12.5 BTC. Similar to the first halving, Bitcoin experienced a significant price rally leading up to the event. The price surged to around $650 shortly before the halving.

Following the halving, there was a period of consolidation and a subsequent gradual upward trend. However, it took several months for Bitcoin to surpass its pre-halving price. The real bull run for Bitcoin began in late 2016 and extended into 2017, with the price reaching unprecedented levels, surpassing $20,000 by the end of the year.

Third halving (May 11, 2020): The third halving reduced the block reward from 12.5 BTC to 6.25 BTC. In the months leading up to the event, Bitcoin experienced a substantial price increase, reaching a peak of around $10,000.

Following the halving, there was a short-term price correction, but the overall trend remained bullish. Bitcoin experienced a significant rally in the latter half of 2020 and early 2021, eventually reaching an all-time high of over $64,000 in April 2021.

Scarcity Is the Main Driver to BTC

Bitcoin met its all-time high at $73,047 on CoinEx.

The three Bitcoin halving events have shown certain patterns in price performance. Due to growing demand and expectation, Bitcoin saw notable price increases before each halving. As the market processed the halving, there was usually a period of price consolidation and brief corrections. But in the long run, the price of Bitcoin tends to move into a bull market due to a shortage of the asset and possible rises in demand.

The latest halving reduced the block reward from 6.25 BTC to 3.125 BTC. With the supply of newly minted Bitcoins entering the market decreases, a sense of scarcity is created and can potentially increase the perceived value of Bitcoin.

What Differentiates the Fourth Halving

So far, we are relating the fourth halving to its predecessors, but we should not neglect that there are new factors for this time.

First, there were neither Ordinals nor Runes over the past Bitcoin halvings. The Ordinals originated in September 2022, while Runes is a total new-born protocol after the fourth halving is finished. Both of them rejuvenated the ecosystem of Bitcoin, giving it more use cases than just a currency for investment.

Second, there was no spot Bitcoin ETF either. The Bitcoin ETF created a bridge between cryptocurrencies and traditional investors, allowing them to join crypto investments and possibly create a larger demand for Bitcoin than ever before.

For many cryptocurrency enthusiasts, the world of cryptocurrencies seems to operate independently of the real world. But they should not overlook the factors that happened in reality, like geographical tensions and the pace of interest rate cuts by the Federal Reserve. These factors also have the potential to influence the short- to medium-term price trends of Bitcoin.

The Manner Needed for BTC Outlook

Many investors, even those unfamiliar with cryptocurrencies, hold the belief that Bitcoin has a promising long-term outlook.

However, it is important to understand that the reasons behind Bitcoin's price fluctuations often cannot be analyzed from the perspective of traditional currencies. Explanations for price changes sometimes quickly spiral into self-fulfilling market narratives in the speculative world of crypto trading. Bitcoin enthusiasts should not overly rely on past trends and avoid being excessively optimistic about the future price movements of Bitcoin.

As has always been said, past performance is no guide to future performance. Stay with our Academy and make your trade on CoinEx, so you would have the information updated and trading with trust.

Disclaimer: Please note that the information provided on this website is intended for informational purposes only. CoinEx assumes no liability for any financial losses resulting from cryptocurrency trading. It is advised that you conduct your own research.

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