In the world of cryptocurrencies, an event of great significance to both private and institutional investors is on the horizon: the Bitcoin Halving. This event, which takes place every four years, attracts a lot of attention and could simultaneously hold enormous potential. In this article, Dr. Ulli Spankowski, Chief Digital & Product Officer at Boerse Stuttgart Digital, as well as crypto expert, sheds light on the impacts of the upcoming Bitcoin Halving on institutional investors and how they can prepare for this significant event.

What is the Bitcoin Halving?

The Bitcoin Halving marks a crucial moment in Bitcoin mining where the reward for miners is halved. This event occurs every four years and is embedded in the Bitcoin protocol. The Halving was introduced as a countermeasure against inflation to preserve the scarcity of the digital currency. The repeated reduction of newly created Bitcoins means that the supply of the digital currency increases while demand remains stable. This stands in stark contrast to the global inflation rate, sometimes exceeding 5%, and underscores Bitcoin's stability and long-term value preservation.

How does the Bitcoin Halving work?

Mining is a process where a decentralized network verifies all Bitcoin transactions. When the Bitcoin network started in 2009, miners received 50 BTC per block. This amount has halved every four years since. Currently, miners receive 6.25 BTC as a reward for successfully verifying a block of transactions. After the next halving, the reward per block will be 3.125 BTC. The blockchain receives new transaction blocks approximately every 10 minutes, and according to Bitcoin code, the reward for miners is halved after every 210,000 blocks created. This event, which occurs approximately every four years, often accompanies increased volatility in Bitcoin’s price. In total, there will be 33 Bitcoin Halvings. It’s already determined when the last halving will occur, which is expected to be in 2140. By that time, 21 million Bitcoins will be in circulation.

What impact does Bitcoin Halving have on price development?

Historical price trends show that halvings closely correlate with Bitcoin’s price and significantly impact market dynamics. The first halving occurred on November 28, 2012, when the reward was reduced from 50 BTC to 25 BTC. The chart below illustrates how Bitcoin’s price has evolved following previous halvings:

 

 

Although predictions about future Bitcoin prices are speculative, many investors and market observers anticipate that the next halving will also impact the market. Historical patterns suggest it will have similar effects. The reduction in rewards for miners results in slower growth of newly generated Bitcoins, potentially causing a supply shortage if demand remains steady or rises, thereby pushing up the price.

When is the next Bitcoin Halving?

The next Bitcoin Halving will not occur at a fixed point in the future but will be triggered once the total number of blocks on the Bitcoin blockchain reaches 840,000. Currently, a new block is generated approximately every 10 minutes. Right now, CoinMarketCap’s countdown points to a date around April 20th, 2024.

What opportunities does the Bitcoin Halving offer institutional investors?

For traditional financial institutions like banks, brokers, and asset managers, the momentum of the 2024 Bitcoin Halving could be an exciting time to diversify their portfolios, including adding cryptocurrencies.

• Supply and demand: the halving reduces the rate at which new Bitcoins come to the market. This can lead to a supply shortage if demand remains constant or increases, potentially driving up the price.
• Price volatility: historically, the Bitcoin Halving has led to increased price volatility. For institutional investors adept at analyzing and leveraging short- and long-term price fluctuations, the Bitcoin Halving presents an interesting opportunity.
• Long-term value preservation: institutional investors view Bitcoin as a viable asset for long-term value appreciation, especially due to its limited total supply of 21 million coins and the supply scarcity intensified by the halving. This halving event reinforces Bitcoin’s role in portfolio diversification and as a hedge against inflation, thus strengthening its appeal for long-term value preservation.

In anticipation of the upcoming Halving, some institutional investors believe that they can invest in an asset with the potential for long-term growth and preservation of value. Additionally, they may explore short-term trading opportunities to profit from any potential increased volatility.

 

Want to take advantage of the upcoming Bitcoin Halving, but not quite sure how? Boerse Stuttgart Digital is your leading regulated infrastructure partner in Europe, ready to guide you step-by-step into the world of crypto and digital assets.