Bitcoin’s highly anticipated halving event concluded on April 20, reducing the block mining reward from 6.25 BTC to 3.125 BTC. This marks the fourth halving event in Bitcoin’s history, and previous halvings have been followed by significant price increases. After the 2012 halving, Bitcoin’s value surged by an impressive 9,500%, while the 2016 halving saw a 3,000% increase over the following year. However, the price rally following the 2020 halving was more modest, with Bitcoin’s value rising by only 650%.
Leading up to the halving, Bitcoin experienced a 110% price increase amid high volatility. In the week before the event, Bitcoin’s value dipped 17% from $72,000 to $60,000. Following the halving, Bitcoin’s price continued to fluctuate rather than stabilize. It reached a price point of $67,000 on April 24, only to drop back to $62,500 just 72 hours later.
Some analysts, such as those from Bitwise, advised caution to investors, suggesting that the halving was a “sell the news” event. JPMorgan and Deutsche Bank analysts shared this sentiment, projecting that BTC could reach as low as $42,000 in the coming weeks.
Despite the volatility, United States-based spot Bitcoin exchange-traded funds (ETFs) have seen significant growth since their launch in January 2024. BlackRock’s iShares Bitcoin Trust (IBIT) had a 71-day streak of daily inflows, accumulating nearly $15.5 billion in assets before recording zero net inflows on April 24. Other Bitcoin ETFs, such as Fidelity’s Wise Origin Bitcoin Fund and ARK Invest’s ARK 21Shares Bitcoin ETF, have also attracted decent inflows. In total, U.S. spot Bitcoin ETFs have accumulated $12.3 billion in assets under management.
While inflows have slowed in the second quarter of 2024 compared to the peak in the first quarter, analysts remain optimistic about continued demand. Matt Hougan, chief investment officer for Bitwise, believes that BTC ETFs are just getting started and could gather over $200 billion in inflows by the next halving in 2028.
Some experts also believe that Bitcoin’s L2 ecosystem, including developments like the Nakamoto upgrade to the Stacks network, will play a crucial role in driving the cryptocurrency’s future growth. The Nakamoto upgrade enhances transaction throughput and establishes finality for L2 transactions on Bitcoin’s base layer, enabling faster block processing times and unlocking Bitcoin’s programmability. This could reignite interest in Bitcoin and create new opportunities for decentralized applications and smart contracts.
Innovations like Ordinals and BRC-20 tokens have also emerged within the Bitcoin L2 ecosystem. Ordinals allow for the inscribing of digital artifacts directly onto individual satoshis, creating nonfungible tokens (NFTs) on the Bitcoin blockchain. BRC-20 tokens propose a standard for issuing fungible assets on the Bitcoin network, expanding Bitcoin’s utility for decentralized finance (DeFi) applications and other financial instruments.
While short-term volatility may persist, analysts expect Bitcoin’s long-term trajectory to be positive. Factors such as increasing ETF inflows and the growth of the L2 ecosystem contribute to an optimistic outlook for Bitcoin’s future.