Bitcoin halving basics to know

The Bitcoin halving is expected sometime between April 16 and April 20.

There’s never a dull moment on the blockchain. Here’s what you need to know this week:

Bitcoin is hovering near $70K as the halving approaches. Market watchers are divided on what’s next for crypto markets post-halving.

The basics to know about Bitcoin’s halving. What it is, why it matters, and what happened after previous halvings.

This week in numbers. Uniswap’s trading volume milestone, the sizable funding round for a new layer 1 blockchain, and more stats to know.

A$175,409.57

A$5,392.29

A$4.54

A$1.54

A$251.43

A$1.55

See the latest prices

MARKET UPDATE

BTC hovers near $70K as halving approaches

Last month, as a massive wave of capital flooded into the new spot bitcoin ETFs, the biggest cryptocurrency by market cap surged to a new all-time high north of $73,000. Since then, prices have remained high by historic standards but have bounced around a fair amount from week to week or even day to day.

This week started strong, with BTC cruising past $72,000 on Monday. But by Wednesday morning, prices had dipped closer to $68,000, as a higher-than-expected inflation report pressured stock and crypto markets. At the same time, some of bitcoin’s recent volatility is likely due to BTC’s rapidly approaching halving (more on what that is in the second story below).

This year’s rally has been powered by a variety of forces, including the blockbuster success of spot BTC ETFs, Bitcoin’s coming halving, and the potential for interest-rate cuts later this year. But with stubbornly high inflation figures, some traders fear that the Federal Reserve could delay rate-cut plans.

So, where do experts think crypto markets could head next? And what else is happening in the cryptosphere? Here’s what you need to know.

Crypto investment products keep growing, but is appetite starting to level off?

The BTC ETF boom keeps rolling along, according to asset manager CoinShares, with crypto investment products adding $646 million in inflows last week. BTC products made up the lion’s share of the inflows, and ETH products saw outflows for the fourth consecutive week.

Total year-to-date inflows climbed to a record-breaking $13.8 billion — which is especially impressive given it’s only the second quarter of 2024.

However, there “are signs that appetite from ETF investors is moderating,” according to CoinShares, with the firm also noting that “volumes last week declined to $17.4 billion for the week compared to $43 billion in the first week of March.”

Market watchers are split on BTC’s post-halving future.

In a new interview with CNBC, Ripple CEO Brad Garlinghouse said that he believes crypto’s total market cap will double this year, from around $2.6 trillion, as of early April, to more than $5.2 trillion. In addition to factors like crypto ETFs and the halving, Garlinghouse suggests that regulatory clarity will begin to improve in the U.S. in 2024.

“The U.S. is still the largest economy in the world, and it’s unfortunately been one of the more hostile crypto markets,” said Garlinghouse. “And I think that’s going to start to change.”

But not everyone is quite as bullish.

Arthur Hayes, the cofounder of crypto derivatives platform BitMex, suggests that prices could fall in the immediate wake of the halving, but should ultimately rise in the medium term.

Hayes argues that markets often defy conventional wisdom, and halvings are widely perceived to precede price increases. He also pointed to macroeconomic factors including April’s tax payments driving down liquidity, as well as his belief that the Federal Reserve will tighten the money supply.

What’s happening with spot ETH ETFs?

Following the success of the BTC ETFs, a number of firms — including Wall Street titans BlackRock and Fidelity — are seeking SEC approval to launch similar products for ETH.

And while BlackRock has only failed once in its more than 500 attempts to gain approval for an ETF, the odds of a near-term greenlight seem to be fading.

This week, executives from VanEck and Ark Invest — two of the firms seeking approval — both indicated that they believed the SEC would decline to approve their applications.

“The way the legal process goes is the regulators will give you comments on your application, and that happened for weeks and weeks before the bitcoin ETFs,” a VanEck representative told CNBC. “And right now, pins are dropping as far as Ethereum is concerned.”

Many traders remain optimistic, however, and ETH prices have climbed about 6% in the last week.

The bottom line…

As the 2024 rally rolls on, mainstream sentiment around crypto seems to be warming up.

A new Deutsche Bank survey of 3,600-plus customers found that more than 52% believe that crypto is becoming an “important asset class and method of payment transactions” — up from just 40% in September 2023. And less than 1% reported believing that crypto is “a fad that will eventually fade.”

Meanwhile, Deutsche Bank’s analysts are optimistic that crypto prices will remain elevated, reports Reuters, with the bank saying prices will be supported “by the upcoming Bitcoin halving, as well as by regulation, [and] central bank rate cuts.

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BLOCK PARTY

Everything you need to know about the Bitcoin halving

Just like the Olympics, the World Cup, and U.S. presidential elections, Bitcoin’s “halving” mechanism operates on a four-year cycle.

Sometime in the next two weeks — between April 16 and April 22 — the network’s fourth-ever halving will finally be here, and we’ll all find out what it means for BTC prices as well as the crypto market at large.

But before we get there, here’s everything you need to know about one of the biggest events on the crypto calendar, from how the halving works and why it matters, to how BTC responded after each previous halving.

What is the halving?

Bitcoin is designed to be a scarce, inflation-resistant asset. One mechanism used to achieve this is the halving.

Approximately every four years (or every 210,000 Bitcoin blocks, to be exact) the amount of new BTC created by mining declines by half until all 21 million BTC are mined sometime next century, around the year 2140.

In 2009, the block reward — the amount of new BTC issued by the network every ten-or-so minutes — was 50 BTC.

Right now, bitcoin miners receive 6.25 BTC (worth around $430,000 as of Wednesday). After this month’s halving, the block reward will fall to 3.125 (worth around $215,000 at current prices).

Wait, what is mining again?

Understanding the halving means first understanding a bit about bitcoin mining.

Bitcoin uses a “proof of work” system to ensure its security and verify new transactions. How does it work? About every ten minutes, all of the computers on the network race to become the first to solve a time-consuming math puzzle. The winner gets to add the latest “block” of new transactions to the blockchain and is rewarded with newly created bitcoin (and fees) in exchange.

As the computing power on the network grows, the puzzle automatically increases in difficulty in order to maintain the ten-ish minute cadence for adding new blocks of data to the blockchain and issuing new BTC via “block rewards.”

Why is the halving important?

By issuing fewer BTC over time, the halving makes it more likely that bitcoin's value will rise, assuming consistent levels of demand. This offers a sharp contrast to fiat currencies, which typically decline in value over time via inflation — which is why you could buy a Ford Mustang for $2,510 in 1972.

But the halving isn’t important only because of its implications for bitcoin’s supply and demand. The halving has also become a hotly anticipated event that garners a huge amount of media coverage. Halving headlines can pique the interest of new traders while galvanizing existing traders, who may hope to capitalize on potential price movements associated with the event.

Historically, the halving has been followed by significant gains, which has many traders hoping for a repeat. (Remember though: Past performance is not indicative of future results.)

What happened in previous halvings?

Between 2012 and 2020 there were three halvings. On average, bitcoin rose 64% in the six months prior to the halving and 348% in the six months following. While those are certainly impressive numbers, a closer look by Coinbase Institutional at what happened each time highlights some stark differences in bitcoin’s performance over the years.

The first halving, in November 2012: Bitcoin was trading at around $5 in the six months before the first halving, and rose nearly 140% to $12.30 by the time the halving took place. Six months later, the cryptocurrency had soared nearly ten times higher to $125.87 (with prices for the cycle peaking around $229.49). The first halving saw the biggest percentage gains of any halving by far.
The second halving, in July 2016: Bitcoin experienced more muted price gains around its second halving. After trading at $449 six months before the halving, it saw a 46% gain to $657. Six months after the halving, prices were up 37% (the cycle peaked at $1,120 that December).
The third halving, in May 2020: In the six months leading up to the third halving, bitcoin actually fell by 2%, from $8,813 to $8,600 — largely a result of the market impacts of the global pandemic. Within six months, bitcoin was up 82%, to $15,694. (Prices for that cycle eventually peaked around $69,000 in November 2021.)

The bottom line…

So what will happen this time? It’s hard to say! While the halving has historically been a bullish catalyst, it’s just one of the many storylines that will shape markets this year.

Factors like rising Wall Street interest via ETFs and tokenization, economic forces like interest rates and inflation, shifting regulatory landscapes, and consumer sentiment around crypto will all help determine what happens as Bitcoin’s fourth halving unfolds.

NUMBERS TO KNOW

$2 trillion

Total all-time trade volume Uniswap surpassed last Friday, hitting a key milestone. Since its launch in 2018, Uniswap has become the most popular decentralized exchange (DEX) by transaction volume, and a top-performing DeFi app on Ethereum. (A DEX, unlike a centralized exchange, is a peer-to-peer marketplace where transactions occur directly between crypto traders.)

$225 million

The amount raised by Monad Labs — which is building a layer 1 blockchain designed to compete with Ethereum and Solana — in a funding round led by investment firm Paradigm. According to Pitchbook, this year’s spike in crypto prices has spurred the return of venture funding for crypto-related startups. In the first quarter of 2024, crypto companies raised $2.5 billion, up 32% from the last quarter of 2023.

66%

First-quarter percentage gain posted by Pantera Capital’s Liquid Token Fund, which holds a variety of cryptocurrencies “focused on decentralized finance and adjacent assets.” Pantera, which launched the first-ever crypto fund in the U.S. in 2013, attributed much of Liquid Token Fund’s recent gains to Solana’s recent performance.

43%

Percentage share of stablecoin value that's been transferred on Solana during this bull cycle, according to a recent report from Bernstein. Solana’s growing usage for stablecoin payments has come at the expense of Ethereum, which led in stablecoin value transferred during the previous cycle.