The Bitcoin halving is the most awaited moment in 2024. Until now, crypto marketers and experts have provided valuable insights regarding the impact of the event, considering that the mining reward will be cut in half to decrease supply and increase demand. While investors and traders can benefit from the halving, miners might have to change their approach to sustain their activities, considering how expensive it is to set up a mining rig and deal with consistent energy consumption.
Besides owning scarce Bitcoins, investors can access unique Bitcoin assets, such as the spot BTC ETFs, which have received much public attention, according to data from Binance. These financial products are unique because users don’t have to hold the coin to trade it, so participating in the crypto market is more accessible and straightforward.
Still, the halving about to happen in April 20024 might have a bigger impact on the market than we expected. Here’s why.
What happens during the halving that affects prices?
The halving this year will cut the mining reward from 6.25 BTC to 3.25 BTC per block. As we’ve noticed in the few months that passed, the demand for the cryptocurrency increased a little, but it’s expected for the prices to go down during the event. However, what happens after is more important.
When the halving finally settles, on-chain activity might reduce inflationary pressure, helping investors adjust their portfolios. The selling pressure, therefore, falls, so people will be less prone to FOMO and panic-selling their assets, as it usually happens.
How do ETFs contribute to the market buzz?
Spot BTC ETFs have been in high demand since 2023, and the trend continued since investors were eager to invest in these projects despite the government’s disapproval of their reliability and security. Spot ETF allows anyone to buy a share of the Bitcoin holdings funds, so there’s less risk exposure involved and increased gains.
The wait for BTC ETF projects skyrocketed the Bitcoin prices considerably, especially after the SEC approved a few projects. Some of them include Grayscale Bitcoin Trust, Bitwise Bitcoin ETF or Hashdex Bitcoin ETF, and they’ve been a success recently due to so much interest.
The best thing about ETFs is that investors don’t have to deal with crypto exchanges anymore, so they control their own assets and security. At the same time, ETFs include different securities besides BTC, such as Google stocks, increasing their chances of profit.
However, investors must be wary of potential dangers
Although ETFs are considerably appreciated and in demand, investors must manage high fees due to the competitive pricing between project issuers, as they want to attract investment. Price inaccuracy problems might also arise due to its multiple holdings because when the prices increase or decrease, the value gaps will affect its performance.
Security issues might also be around the corner because they will be assessed in a government-regulated environment. Although safety will be ensured through the Bitcoin blockchain, chances are that users might be exposed to market manipulation instead of trading in a free ecosystem.
Moreover, the short-term volatility due to increased market attention and speculation can expose investors to a dangerous dynamic of the cryptocurrency market, so every step must be taken with precaution.
When will the last halving occur?
According to current calculations, the last Bitcoin halving is set to happen in 2140, when the final Bitcoin is released. After that, there won’t be any Bitcoins issued as they’ll reach the maximum supply, but transactions will continue. Bitcoin miners will also benefit from rewards, but they’ll come from transaction processing fees.
Still, depending on how Bitcoin evolves, these stats might change in the future, with miners possibly charging higher transaction fees to process massive transactions. If the layer 2 blockchain develops, the Lighting Network can facilitate transactions.
It’s still unclear if Bitcoin will remain in this position until then, considering how many other cryptocurrencies are released and their significant potential. Ethereum, for instance, comes second to Bitcoin since it didn’t steal the start but delivers numerous features and better blockchain services, so it might take its place on the podium.
Bitcoin is not perfect
Although there’s a massive demand for Bitcoin, the digital asset has disadvantages that might hinder investors’ interest in acquiring it. With sudden price spikes, Bitcoin has always been and will continue to be considerably volatile. Indeed, investing for the long term and choosing not to be influenced by FOMO will lower people’s risks, but not entirely.
At the same time, the regulatory uncertainty revolving around Bitcoin can determine its development. Although it achieved global expansion and most people heard about it, the lack of knowledge for both citizens and governments led to uncertainty regarding its safety and profitability in the future. Therefore, Bitcoin is banned in some areas and barely used in others. Bitcoin is legal tender only in El Salvador, but the solution hasn’t brought prosperity to the country and might’ve had more negative effects.
What should you do during the halving?
Analyzing the past halvings is crucial to understanding the possible dynamic for 2024. Hence, preparation is needed to withstand the significant changes in the market, so the best way to do it is to build a strong portfolio. Diversification implies you choose multiple solid and diverse assets or cryptocurrencies to sustain the portfolio’s value, such as Ethereum, XRP and Dogecoin.
The crypto portfolio should also include payment, security, and utility tokens, but the assets should be diversified based on industry. Healthcare, supply chain, and transportation are the best when it comes to investments as they’re massive sectors, but you can also organize the portfolio by asset class and investment vehicle.
Bottom line
The Bitcoin halving is an essential event for 2024, and professionals have already examined the outcome. The general opinion is that the pos-halving period will be the real deal breaker because the minimized mining reward and the spot BTC ETFs drive prices up, so the market might experience a sudden value shift. The halving means risks and benefits, but investors must be careful and prepared to protect their Bitcoins.
-In Collaboration with Binance
