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Following a recent decline from its all-time high, bitcoin is last seen at $65507. Economists and analysts are discussing historical trends that point to the looming halving event that is anticipated in April in response to this price volatility.
It is worth noting that Bitcoin reversed early losses and moved higher on Wednesday as investors paused following the recent decline to consider the Federal Reserve’s most recent policy decision. According to Coin Metrics, the flagship cryptocurrency’s price increased by 1.7% to $65,773.23. It had dropped as low as $60,793.60 earlier in the day.
Following the Federal Reserve’s two-day policy meeting, where it kept interest rates unchanged as anticipated and reiterated its expectation of further rate decreases this year, cryptocurrency values gained strength. Similar to tech stocks, low interest rates and more market liquidity can occasionally help bitcoin, which can improve investor sentiment and encourage more investment in growth assets.
A Look Back: Price Dips Before Halving
Even though the price of Bitcoin is currently down -3.48%, price retracements before the awaited event are not a brand-new phenomenon. Before the corresponding halving events in 2020 (about 20%) and 2016 (about 40%), there were comparable declines. It appears that the present 20% decline in 2024 will continue along this path.
Halving Effect
For Bitcoin mining, the halving event itself functions as a sort of “wildfire”. The overall mining hash rate is decreased when less profitable miners are driven out by halving miner rewards. There may be transient volatility as a result.
The good news is that such halving events have traditionally been followed by large rallies. Following the halving, the price increased 17 times in 2016 and 6 times in 2020. These protracted protests usually continue for eighteen months.
Demand Shocks
The launch of multiple spot Bitcoin ETFs is another significant event that takes place at the same time as this year’s halving. This has further impacted market behaviour by creating a demand shock. The impending halving may lead to an even bigger rise if institutional interest is heightened.
New Era for Bitcoin?
The cryptocurrency may enter a new age as a result of the halving and the growth of Bitcoin ETFs. Investors and traders may witness a spike in Bitcoin and related equities as institutions close the gap with individual investors. Although there will probably be some volatility in the near term, things seem to be looking well in the long run.
Even though the recent decline in prices may seem alarming, it’s crucial to keep in mind previous trends. The impending halving and the growth of Bitcoin ETFs may act as triggers for a significant price spike in the upcoming year. Economists even urges all to get prepared for the next chapter in the history of Bitcoin.
