Bitcoin's upcoming Halving event and the impact of Bitcoin ETFs

By Caroline Bowler (pictured), CEO of BTC Markets

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The integration of cryptocurrency into mainstream financial institutions is a crucial consideration for Australian investors. Recent developments in US regulations regarding spot Bitcoin ETFs and the advocacy of major investment firms highlight the growing acceptance of crypto in traditional finance.

The recent decision by the SEC is seen as a pivotal step, opening up Bitcoin to retail and institutional investors. Locally, it sets the stage for potential ASX listings of spot Bitcoin ETFs, further integrating crypto assets into mainstream financial services. The lasting impacts of these developments are expected to unfold progressively over time, influencing cryptocurrency markets and investor participation.

Research from Standard Chartered forecasts a potential US$100,000 valuation for Bitcoin by the end of the year, drawing parallels with the growth of gold ETFs. The upcoming Bitcoin halving in April is viewed as an additional positive indicator for its market dynamics.

The Bitcoin halving typically impacts BTC price positively. The halving event occurs approximately every four years and involves a reduction in the rewards miners receive for validating transactions by half. This event is hard coded into Bitcoin’s protocol and is designed to limit the total supply of Bitcoin to 21 million.

The mechanism behind the positive impact on price lies in the reduced rate at which new Bitcoins are created, leading to increased scarcity. With a diminished supply of new coins entering circulation, there is less selling pressure from miners. Historically, this scarcity has been associated with bullish market trends.

Investors often anticipate the halving event, leading to increased demand as they expect the reduction in supply to drive up the value of existing Bitcoins. The combination of decreased supply and heightened demand can contribute to upward price movements.