Bitcoin’s highly anticipated halving event took place on April 20, reducing the block mining reward from 6.25 BTC to 3.125 BTC. This is the fourth halving event since Bitcoin’s inception, and historically, these events have been followed by significant price surges. After the 2012 halving, Bitcoin’s value soared by an impressive 9,500%, and the 2016 halving saw a 3,000% increase over the following year. However, the price rally after the 2020 halving was more modest, with Bitcoin’s value only rising by 650%.
In the lead-up to the halving, Bitcoin experienced a 110% price increase amidst significant volatility. In the week before the halving, Bitcoin’s value dropped by 17% from $72,000 to $60,000. After the halving, Bitcoin’s price continued to fluctuate, reaching a high of $67,000 on April 24, only to drop back to $62,500 just 72 hours later.
Some experts have advised caution due to the volatility surrounding the halving. Bitwise, an asset management company, suggested that the halving was a “sell the news” event. Analysts from JPMorgan and Deutsche Bank also concurred with this sentiment, projecting that BTC could reach as low as $42,000 in the coming weeks.
Despite the potential risks, United States-based spot Bitcoin exchange-traded funds (ETFs) have seen significant growth since their launch in January 2024. BlackRock’s iShares Bitcoin Trust (IBIT) experienced a record-breaking 71-day streak of daily inflows, accumulating nearly $15.5 billion in assets before recording zero net inflows on April 24. Other Bitcoin ETFs, such as Fidelity’s Wise Origin Bitcoin Fund and ARK Invest’s ARK 21Shares Bitcoin ETF, have also attracted decent inflows. Since their launch, U.S. spot Bitcoin ETFs have amassed $12.3 billion in assets under management.
While inflows have slowed in the second quarter of 2024 compared to the peak in February, analysts remain optimistic about continued demand. Matt Hougan, chief investment officer for Bitwise, believes that BTC ETFs are just beginning to tap into their potential. He predicts that Bitcoin ETFs could gather over $200 billion of inflows by the next halving in 2028.
In addition to ETFs, the growth of Bitcoin’s layer-2 (L2) ecosystem has emerged as a significant driver of the cryptocurrency’s future potential. The recent Nakamoto upgrade to the Stacks network, a leading L2 built on Bitcoin, has enhanced transaction throughput and established finality for L2 transactions on Bitcoin’s base layer. This advancement in L2 infrastructure is expected to reignite interest in Bitcoin itself as users begin to separate BTC, the asset, from Bitcoin’s underlying rails.
The burgeoning Bitcoin L2 ecosystem has also given rise to innovations like Ordinals and BRC-20 tokens. Ordinals allow for the inscription of digital artifacts directly onto individual satoshis, enabling the creation and ownership of nonfungible tokens (NFTs) on the Bitcoin blockchain. BRC-20 tokens propose a standard for issuing fungible assets on the Bitcoin network, expanding Bitcoin’s utility by enabling the creation of decentralized finance (DeFi) applications and other financial instruments.
While short-term volatility may persist, a combination of factors, including surging ETF inflows and the thriving L2 ecosystem, paints an optimistic picture of Bitcoin’s long-term trajectory.