The Bitcoin Halving is Complete! What’s Next?

On the evening of April 19th, Bitcoin completed its fourth halving, reducing the supply given to miners from 6.25 BTC to 3.125 BTC per block. This is typically one of the most hyped events in crypto because of its association with bull markets and its role as a reminder of Bitcoin’s sound money mechanics. However, this year is different – the Bitcoin ETFs, regulatory certainty, and technological innovations make the directions that Bitcoin could go from here more unique than anything we’ve seen before. 

When Bitcoin was created in 2008, the miner of each block received 50 BTC as a reward from the network alongside transaction fees, which came strictly from the inflation of the Bitcoin supply. Satoshi Nakamoto coded into the blockchain that this block reward would halve approximately every four years until all Bitcoins are in circulation in 2140. At this point, miners will solely subside off transaction fees, and hopefully, the Bitcoin experiment will have made it the leading global currency.

The most obvious impact of halving is that mining operations will earn half as much as they previously did if the price does not change. Given that many miners sell a majority of their Bitcoin as soon as they receive it, this could significantly decrease the selling pressure for Bitcoin coming from miners. Whether or not 450 less BTC per day being sold will counteract sell pressure from ETFs or long-term retail holders remains to be seen, but it certainly cannot hurt.

The more significant impact of the halving comes from the implications, media attention, and buyer FOMO it causes. In 2016 and 2020, the Bitcoin halving kicked off two of the biggest bull markets ever seen. Both times, the market was slow around the halving time but reached new all-time highs in Q4 of that year. However, this year, there have been more catalysts for Bitcoin than ever before. The ETFs, released in early January, saw some of the biggest financial institutions in the world buying Bitcoin and explaining it to their peers. Larry Fink, CEO of BlackRock, has been going on CNBC and talking behind closed doors about the value of Bitcoin as a hedge against government spending and inflation and recommending clients move 5%+ of their position to the digital asset. 

At the same time, innovations like Bitcoin Layer 2s, Ordinals, and the newly released Runes standard have made Bitcoin a hub for innovation yet again. When the Runes token standard was released in the same block as the halving, there was speculation that it would be one of the most expensive blocks in history, with so many people trying to create or mint runes. This was correct, and three of the five most expensive transactions in Bitcoin history were mined, totaling nearly millions of dollars in fees. The transaction fees have yet to return to normal levels, and they are not expected to for weeks, if not months, as people continue to speculate on runes. Additionally, with Bitcoin Layer 2s releasing constantly and more drive towards introducing code to Bitcoin to make it technically possible, it is becoming more likely that over a trillion dollars of BTC can now access the world of decentralized finance. 

Though all of these developments are extremely positive, it must be considered that this is a unique situation for Bitcoin with no historical precedent. Though the market may typically peak after the halving, the inflow of institutional money over the past four months and the all-time high from mid-March call into question what could happen next. The halving was priced in way before it took place, so there is nothing for investors to look forward to beyond the runes memecoins driving up transaction fees and the potential for L2s to go live within the next several months. 

From here, there are two obvious paths for Bitcoin to take: it may stay around this same price or fall a little lower as we enter a subdued market after high volatility and enthusiasm, or it will continue its prior tradition of massive growth in the months following the halving. Typically, it would be simpler to speculate on Bitcoin following previous trends, but institutional money and unprecedented legitimacy for BTC call into question what it will do from here. Regardless, the sentiment is that there has never been a stronger time for Bitcoin.

By Lincoln Murr

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