The cryptocurrency market remains highly active lately as investors are increasingly interested in new spot bitcoin (BTC) exchange-traded funds ahead of the upcoming bitcoin halving event in April. This event typically generates significant attention and anticipation in the crypto market.
Simultaneously, there’s a growing focus on the global digital asset regulatory environment. Last month, European regulators passed new anti-money laundering legislation, and the U.S. Securities and Exchange Commission (SEC) has initiated actions that could lead to Ethereum (ETH) being classified as a security ahead of a critical May deadline on various spot Ethereum ETF applications.
Historically, the period from February through April has shown strength in bitcoin prices, and investors are optimistic that the crypto rally observed in early 2024 will extend into the second quarter.
The cryptocurrency market has continued its strong upward trend this year, building on the significant gains seen in 2023, when Ethereum surged by 85% and bitcoin by more than 150% in 2023. Heading into April, bitcoin prices are up about 64% year-to-date, and Ethereum prices have rallied more than 51%.
During the first half of March, bitcoin prices surged to reach a new intraday all-time high of $73,750.16. However, the latter part of the month saw bitcoin trading within a broad range of approximately $60,000 to $72,000. By the end of March, bitcoin prices closed at $70,849, marking a monthly gain of 14%.
In contrast, Ethereum prices experienced a more modest increase of 5.8% for the month, ending at $3,611.
Spot Bitcoin ETFs in the Spotlight
Bitcoin’s price surged above $71,000 multiple times last week, and this increase was supported by significant net inflows exceeding $243.4 million into bitcoin exchange-traded funds (ETFs) on Thursday.
Notably, the Ark 21Shares Bitcoin ETF (ARKB) recorded net inflows of $200.7 million last Wednesday alone, making it the third bitcoin ETF to surpass the $200 million mark since the SEC approved the listing and trading of 11 spot bitcoin exchange-traded product (ETP) shares after years of repeated rejections in January.
Before ARKB, BlackRock’s iShares Bitcoin Trust (IBIT) and Fidelity Advantage Bitcoin ETF (FBTC) crossed this $200 million mark in a single day.
According to James Wo, founder and CEO of Digital Finance Group, the spot bitcoin ETFs continue to play a central role in the 2024 crypto rally.
“Bitcoin broke past its all-time high in March as the bitcoin ETFs saw a daily net inflow of over $1 billion, an amount higher than the inflow experienced from the launch date. As more participants seek to gain exposure to cryptocurrencies, the bitcoin ETFs provided easier access to this asset class, which fueled the strong demand in March, pulling up the rest of the crypto market with it,” Wo stated.
Bitcoin Halving Event: The Primary Catalyst for a Prolonged Climb in Cryptocurrency’s Value
Bitcoin’s recent surge and its overall value proposition are primarily driven by increasing anticipation surrounding the upcoming “Bitcoin halving” event, scheduled to occur on April 19, 2024. This event is a built-in feature of Bitcoin’s protocol that reduces the rate of bitcoin production, with the block reward expected to decline from 6.25 BTC to 3.125 BTC.
The halving event holds significance on multiple fronts. Firstly, it directly impacts the economics of Bitcoin mining. As the block reward decreases, miners earn fewer Bitcoins, potentially affecting the profitability of mining operations. This could lead some miners to cease operations if mining costs outweigh the rewards, resulting in adjustments to the network’s hash rate and mining difficulty.
Additionally, the halving sparks heightened speculation and interest from investors and traders. Historically, Bitcoin halving events have been linked to bull markets and price surges due to reduced supply and sustained or increased demand. The halving underscores Bitcoin’s deflationary nature and scarcity. With the issuance rate halved, Bitcoin becomes scarcer over time, potentially driving up demand and long-term price appreciation.
Historically, halving events have led to substantial price increases for Bitcoin. For instance, after the 2012 halving, Bitcoin’s price surged from $12 to over $900 within a year. Likewise, following the second halving in 2026, the price climbed from about $600 to $2,500.
Further, the third halving event held in May 2020 saw the price jump from around $8,000 to over $40,000 within a year.
In the past, bitcoin’s price typically showed stability before its halving events, often due to an uptick in supply available on exchanges. However, this time, there’s a notable difference, as pointed out by Austin Arnold, a crypto market analyst and the founder of “Altcoin Daily.”
He added that an unprecedented level of excitement and institutional fear of missing out (FOMO) surrounding Bitcoin, fueled by a quest for inflation-resistant assets, contributes to a potential supply-and-demand shock even before the actual halving occurs.
Arnold further projected a doubling of Bitcoin’s price within a year post-halving, potentially reaching between $100,000 and $150,000, guided by the fundamental principle of supply and demand dynamics.
Bottom Line
Several major cryptocurrencies experienced a rally lately, fueled by various potential catalysts such as significant net inflows into bitcoin ETFs, notable filings for spot Ether ETFs, and anticipation surrounding the upcoming “bitcoin halving” event scheduled on April 19.
The bitcoin halving event, which is the fourth in bitcoin’s history, with prior halvings in 2012, 2016, and 2020, involves cutting miners’ rewards in half to control the introduction of new bitcoins until the maximum limit of 21 million bitcoins is reached. Historically, bitcoin’s price has surged after each halving event, leading investors to speculate on a potential rally next month.
Analysts speculate that the current Bitcoin price of around $66,000 could potentially reach approximately $150,000 post-halving, highlighting the anticipation and impact of this event on Bitcoin’s market dynamics. The halving event brings significant attention to the crypto space, attracting new investors and contributing to increased trading activity.
While Bitcoin halving events have been associated with bull markets and substantial price rallies, past performance does not indicate future results. So, investors should exercise caution and conduct thorough analysis before making investment decisions, as the crypto market is known for its volatility and unpredictability.
