When you are reading this, Bitcoin’s fourth halving is imminent. The reward that miners will receive for each block every 10 minutes will drop from 625 Bitcoins to 3,125 Bitcoins. Bitcoin’s halving will result in a reduction of the annual Bitcoin supply from 1.6% to 0.8%. But this halving will also bring the launch of the highly anticipated protocol and Bitcoin Token Standard “Runes”. Runes allows the creation and trading of altcoins on Bitcoin. Unlike Ordinals, which essentially are NFTs on Bitcoin, Runes are fully fungible tokens. This enables a major new use-case on top of Bitcoin’s $1.2 trillion market cap. It also provides a boost for Bitcoin miner revenues as transaction fees should increase.
Will this be sufficient to lift the market from its current slump? Since reaching a new all-time-high in mid March, Bitcoin has been trending. Trader’s nervousness showed when news of Iran’s missile launch against Israel resulted in a 10% flash crash which wiped out billions in leveraged positions in minutes. It was the single biggest liquidation event in Bitcoin history. Traders are betting on a drop but with little conviction. Nobody wants to miss a post-halving rally. The direction, at least for now, remains as unclear as two weeks ago. The opportunity to bet on a whole category of new coins on top of Bitcoin could prove exciting. Also, it could compensate miners for the loss of Bitcoin emissions. Miner’s pressure to sell Bitcoin to stay afloat would be less.
Even a breakdown below $60k would not mean an immediate end of the bull market. After the 2020 DeFi Summer, markets took a breather only to rally into fresh highs in 2021. Price drops are normal in Crypto bull markets. How will new Bitcoin ETF holders react to the volatility? That will be a new variable in this cycle. However, at least some of the larger funds that newly entered markets thanks to the ETF will be aware of Bitcoin’s price history. They are unlikely to exit on the first sign of stress.
Whichever way markets go from here, this is also an opportunity to take a step back and appreciate how far Bitcoin and the industry have come. We celebrate the 4th Bitcoin Halving with Bitcoin a trillion dollar asset, ETFs promoted by the largest asset managers in the world and Bitcoin held on the balance sheet of nation states. These in themselves are achievements only very few would have thought possible. And we are just getting started!