Hamburg-based Berenberg Capital Markets recently highlighted in a recent research note that the upcoming Bitcoin halving event could trigger a bullish case for U.S. software company Microstrategy.
The research report emphasizes that Microstrategy's bullish target price is $430, and its value mainly comes from its holdings of more than 150,000 BTC. Berenberg expects that Bitcoin will rebound after each halving.
Halving event and Bitcoin's market impact
Halving events are major events in the Bitcoin network that occur approximately every four years. During these events, the rate of new coin issuance is reduced by 50%, resulting in a slower influx of new Bitcoins into the market. The upcoming fourth Bitcoin halving, which will take place on April 26, 2024, is expected to follow this pattern.
A recent Berenberg research note highlights the historical trends observed during the first three halvings and suggests that the pre-halving rally could begin in about four months. If this rally follows a similar trajectory to previous halvings. This could last until around October 2025, according to the research note.
Berenberg pointed out:
If the historical patterns established by Bitcoin’s first three halvings continue to play out during the fourth halving, the pre-halving rally will begin in about four months. If a rally occurs after the fourth halving and the rally is as long-lasting as the rallies after the past few halvings, it will last until around October 2025.
Correlation between Bitcoin and Microstrategy stock
Research reports show a strong correlation between Microstrategy’s stock price and the price of Bitcoin, estimated at around 0.90. If the fourth Bitcoin halving triggers a significant rise in the price of the cryptocurrency, Microstrategy’s stock will likely follow suit.
The prediction comes as Microstrategy’s stock price could rise on the back of positive expectations for Bitcoin’s post-halving performance.
Microstrategy's stock (ticker: MSTR) has surged 7% in the past day following the release of Berenberg's research note. The stock was trading below its current price range last month and is currently valued at $407.
The positive market reaction reflects optimism about the potential impact of the upcoming Bitcoin halving event on Microstrategy's performance. In addition, it is worth noting that the concept of halving has been associated with significant market fluctuations in the past. Investors closely watch these events for potential opportunities.
The reduction in the issuance of new coins, coupled with market demand, has historically driven the price of Bitcoin. As a result, anticipation of the upcoming halving has sparked interest and speculation among market participants.
Berenberg’s analysis adds to the argument that the halving event could have a bullish impact on the price of Bitcoin. Therefore, for a company like Microstrategy, which holds a large amount of Bitcoin on its balance sheet.