Can we expect an influx of institutional investors in the crypto market due to the Bitcoin halving?

The quadrennial halving event of Bitcoin (BTC) remains shrouded in uncertainty, with many questions about the impact it will have on miners, the hash rate, the price of Bitcoin, and crypto adoption. However, one thing is certain: every four years, miners’ block rewards are cut in half, as pre-coded into the network. In April 2024, after the validation of the 210,000th block, miners’ rewards will decrease from 6.25 BTC per block to 3.125.
This year’s halving could be unique due to the introduction of spot market Bitcoin exchange-traded funds (ETFs) in January. These ETFs have driven the price of Bitcoin to all-time highs, pushing the entire crypto sector close to a $3 trillion market capitalization. This raises the question of whether the halving will accelerate the trend of Bitcoin adoption by institutions.
Some believe that institutions will be more interested in Bitcoin as they understand its monetary policy. The halving demonstrates that Bitcoin security can continue despite a lower “security budget.” Additionally, cutting the block reward in half can be seen as an enticement for institutions that want to buy the coin itself. It shows that the BTC supply will not increase significantly, which is a positive factor for prospective institutional investors.
However, not everyone agrees that the halving alone will attract large corporations or financial institutions to invest in Bitcoin for the first time. Some investors are waiting to see the impact of the halving on miners’ profitability and whether it will reduce volatility. Regulatory clarity is also important for industry adoption and investor base.
While halvings have historically caused a surge in the price of Bitcoin, it is unclear whether the recent price increase is due to the halving or the introduction of spot market Bitcoin ETFs. Some analysts believe that the ETFs have had a greater impact on the price. It is also worth noting that the hash rate of the Bitcoin network, which is crucial for its security, has recovered quickly after previous halvings.
The introduction of ETFs has created a demand shock to Bitcoin’s limited supply, which will drive prices higher and benefit miners. However, there may be unknown effects that will only become apparent after the halving. Overall, scarcity is expected to push the price of Bitcoin up in the long term.
Traditional Bitcoin proxies like MicroStrategy may be more influenced by the ETFs than the halving itself. MicroStrategy has positioned itself as a Bitcoin development company, while the ETFs are less actively managed. However, MicroStrategy’s role as a BTC proxy is expected to continue post-halving.
Miners will be directly affected by the halving, but the mining sector is more mature and stable than in previous years. Some smaller miners may struggle and need to raise capital, while publicly held mining firms may have an easier time raising funds. Transaction fees on the Bitcoin network are crucial for miners, and many are investing in developing the ecosystem of applications built on Bitcoin.
Comparing the introduction of ETFs with the halving, some believe that the ETFs are more important. However, halvings are unique to Bitcoin and reinforce its monetary policy and scarcity as an asset. They also demonstrate the enduring nature of Bitcoin and its ability to survive over the long term.