Bitcoin’s Halving: The Catalyst for the Next Big Crypto Rally?
One of bitcoin’s most important properties, in addition to being permissionless, decentralized, and censorship-resistant, is the fixed supply. This quality makes bitcoin similar to traditional commodities such as gold and silver.
Just as the supply of gold diminishes over time as miners unearth the metal from the earth’s crust, the supply of new bitcoin reduces through an inbuilt mechanism which halves the creation of new bitcoin roughly every four years.
This supply reduction is known as “the halving”, and represents not only a fundamental change to the way Bitcoin operates — but a symbolic celebration of the cryptoasset’s ever-increasing scarcity.
And lest we forget – each halving has historically preceded a big bull run.
Is the Halving priced in?
As mentioned above, the scarcity of bitcoin, and the constant demand, are often used to justify the rising prices that have occurred after each and every previous halving event.
Bitcoin and the Efficient Market Hypothesis
But not every investor agrees, particularly those who believe in the “efficient market hypothesis” which states that the price of an asset reflects all existing available information.
These investors argue that as the halving is a public and predictable event, then the impact of all future halvings must already be reflected in the current price of bitcoin — and therefore the events would not have any meaningful impact on the price.
Unpredictable factors Impacting Bitcoin price
However, even though the halving itself may be perfectly predictable, there are other factors at play that are more difficult to foresee.
These include the increased press coverage of cryptoassets and bitcoin that we often see around halving events, along with renewed interest in the potential of blockchain technology, and growing utility with more emerging real-world use cases for the asset — all of which can impact the price of bitcoin.
Not only that, but bitcoin is also influenced by the ever changing macroeconomic environment, which can influence miners to make different strategic decisions about buying and selling.
