Bitcoin’s price has surged 36% since spot bitcoin ETFs were approved on Jan. 10. As of Thursday morning, its price was around $62,460.
But an upcoming event known as halving could that push price growth further.
Halving happens automatically when 210,000 “blocks” are created as part of the bitcoin mining process. This happens approximately every four years, and it discourages coin production by reducing the reward for mining new bitcoin by half. The last halving event was in 2020, and the next one is expected sometime in April.
Halving is meant to slow the supply of coins as it approaches its total supply, which is capped at 21 million coins. The built-in mechanism mimics the scarcity of gold and ensures that bitcoin mining becomes more expensive over time.
“The expectation is that the halving will lead to an increase in price because people expect supply to become constrained,” says Douglas Boneparth, president of Bone Fide Wealth and a member of CNBC’s Financial Advisor Council.
“When supply goes down, price goes up, assuming demand remains the same or greater,” says Boneparth, who holds investments in bitcoin and other cryptocurrencies.
Historically, the value of bitcoin has increased shortly after its three previous halving events, albeit with diminishing returns with each halving, according to CoinDesk.
Of course, the implications of bitcoin’s halving could be baked into its current price, since the imminent halving is widely known.
“It could be priced in, but now that the spot ETFs are here, the thinking is that institutions will need to buy more bitcoin on the open market to back the flows into their funds,” says Boneparth.
Should you invest in bitcoin?
As with all cryptocurrencies, bitcoin is a highly speculative asset that’s extremely volatile, sometimes with price fluctuations of 5% to 10% in a single day.
While money can be made on bitcoin’s price swings, past performance doesn’t guarantee future success. There are no guarantees that it will retain any of its…
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