By Dan Polotsky, CoinDesk
Compiled by: Felix, PANews
With the upcoming Bitcoin halving, we seem to be on the cusp of a major event. While everyone is keeping an eye on the soaring Bitcoin and the possibility of setting new highs, the impact of this halving is far-reaching and will touch all aspects of the crypto market, and may even mark the end of the four-year bull-bear cycle in the crypto market.
This is not just a matter of numbers, but a huge shift in how traditional industries perceive and interact with digital currencies. Get ready, this may be the beginning of a new era of cryptocurrency.
The rise of Bitcoin
Recently, Bitcoin prices have surged, driven by events such as the upcoming Bitcoin halving event in April, the approval of Bitcoin spot ETFs in the United States, and the entry of financial institutions such as BlackRock into the crypto industry. This institutional interest has brought unprecedented demand, and Bitcoin hit a new all-time high of over $73,000 on March 13. The new high was likely driven by ETF inflows, including $1.045 billion on March 12.
The launch of ETF marks the wider recognition of cryptocurrencies as legal assets and a new stage for institutional investment. In addition, it further enhances Bitcoin’s credibility and accessibility to retail investors.
These landmark developments allow investors to gain exposure to Bitcoin without the complications of direct ownership. Increased liquidity and stability will likely continue to attract a wider range of investors, driving wider mainstream adoption and further fueling the current Bitcoin price surge.
Of course, the bear market still exists. However, various parties' predicted prices for Bitcoin range from US$150,000 to US$250,000 per coin, causing a large amount of institutional capital to flow into the Bitcoin market. This event marks a potential shift in its historical cycle dynamics, driving new levels of growth and innovation across multiple digital asset sectors.
Nothing is absolute, and potential negative factors still exist
Although there is clear bullish momentum in the crypto market, there are several factors that could derail this trend. Continued inflation could prompt monetary policy to tighten, affecting riskier assets such as cryptocurrencies. Sluggish economic growth could also undermine investor confidence and divert attention from speculative investments.
Another short-term negative factor lies in the mining field. The upcoming 2024 halving event is expected to trigger massive consolidation and defaults as cash-strapped miners face declining profit margins and high operating expenses. This could force miners to sell their Bitcoins when they go bankrupt, driving down the price of Bitcoin. Additionally, regulation and reduced inflows pose challenges that could put downward pressure on prices.
Uncertainty surrounding the 2024 election adds another layer of unpredictability. The election results could lead to different regulatory changes, and the U.S. government's stance on cryptocurrencies could change. While a Republican president may provide a more favorable regulatory environment, alignment with values such as financial inclusion and environmental sustainability could promote bipartisan support for crypto regulation.
Is the crypto bull-bear cycle over?
Perhaps the most unexpected are the other effects of the halving. Although historically, halvings have been the driving factor for bull markets, the impact of halvings may be overshadowed by other factors mentioned above, such as net ETF inflows, which currently exceed $12 billion. Institutional and retail ETF investors intervening in the market under the guidance of experienced investment advisors who are good at "buying the dip" may weaken the effect of the halving in driving the market forward.
This will mean the end of the typical four-year bull-bear cycle in the crypto market, and a relatively stable upward trend may occur in the future. ETF inflows will be a major catalyst for cryptocurrency adoption. It is worth noting that this is the first time that the price of Bitcoin has started to surge before the halving, which has not been the case in the past.
This shift could have far-reaching consequences for the entire industry. Initially, the crypto ethos was rooted in a resistance to centralized currencies and institutions, with the slogan “no keys, no coins.” It now appears that the dominant forces in crypto may soon be controlled by a handful of institutions, running counter to the original ideal of decentralization.
The tilt of ownership toward institutions could lead to something even bigger: sovereign nations owning Bitcoin. More countries may follow El Salvador's lead and begin a race to accumulate cryptocurrencies, kicking off a supercycle of global mainstream adoption.
This change could also cause the crypto market to move away from its traditional boom and bust cycles, creating a more stable environment for the industry to grow and develop.
Although fewer retail investors can enjoy the dividends of the bull market, retail investors will also be exempted from the cruel reality of buying at high points and suffering losses when the market plummets.
This new stability can provide crypto companies and projects with the opportunity to focus on sustainable, long-term development, rather than relying solely on riding market cycles and struggling in the crypto winter.
As investors and enthusiasts prepare for higher volatility, it's clear that the market is on the verge of an unprecedented outburst and could undergo a fundamental shift. While the future will be mixed, the coming period could signal a major shift away from cryptocurrencies’ infancy. Before saying goodbye, one should be ready to celebrate its "last dance."
Related reading: Bitcoin returns to $71,000, analysts: next target is $83,000
