That's what everyone wants to know, from regular folks to big financial players.
This halving event occurs approximately every 4 years, happening after 210,000 blocks in the Bitcoin blockchain. Think of each block as a piece of the Bitcoin puzzle created every 10 minutes. What's crucial is that this halving event is a sure thing; it's going to happen, no matter what.
But in the world of finance, just because something is certain doesn't mean prices will automatically go up. If people were certain that the halving would boost cryptocurrency prices, they'd buy Bitcoin today, not wait for the halving day. So, if prices are going to rise, it should be happening now, not months after the halving day.
For example, after the 2012 halving, a few months later, Bitcoin went past $1,000 for the first time. Similarly, in 2017, after the 2016 halving, Bitcoin hit $20,000 a few months later. And again, after the 2020 halving, in 2021, Bitcoin reached nearly $70,000. This question sparks debates; not everyone agrees on the outcome.
But here's where it gets really interesting: the rules of this market change, and so do the players. This ever-shifting landscape makes predicting the next big price surge even more thrilling.
However, keep in mind that past performance doesn't guarantee future results, even though many expect this cycle to repeat. So, please be careful; investing carries risks.
When we look closely, we see that the conditions in previous bull runs might not apply the same way today. That's where it gets intriguing; we can't be sure a bull run will happen. But we can watch for clues and signals that one might be coming, especially between now and the next halving day.
Media Coverage
One big factor is media coverage. I believe it acts like a sensitive radar, and I study it closely. YouTube is a hotspot for us. I watch trends and spikes in interest from the masses. I also keep an eye on videos and stats from various YouTube channels and other social media platforms. Plus, I notice more people wanting to buy cryptocurrencies for the first time.
Media coverage played a vital role in driving interest and adoption. In 2012 and 2013, only a few knew about cryptocurrencies, but it was already a dazzling time. Bitcoin went from a few dollars to $1,200 to $1,300 in 2013, driven mainly by individual investors who saw its value. Media coverage was cautious then, with limited attention from mainstream media outlets. Many were skeptical and portrayed Bitcoin negatively due to a lack of understanding.
However, this media attention piqued curiosity and generated enough interest for a word-of-mouth effect. People jumped into Bitcoin, speeding up its price during the second bull run. But this time was different in some countries. Legal frameworks began forming around the cryptocurrency market. Media coverage grew worldwide, and traditional media started covering it too. Despite ongoing skepticism, cryptocurrencies couldn't be ignored as interest grew.
In 2021, individuals and companies got interested in cryptocurrencies thanks to clearer regulatory rules. This surge in media coverage, along with influential media outlets on social networks and TV, boosted cryptocurrency prices. Notably, countries like El Salvador adopted Bitcoin as legal tender, and Coinbase went public on Nasdaq, further lifting prices.
However, as we near the next bull run, media coverage may change. It might not be as mainstream or widespread. While it will still matter, it might not be the main driver of the next bull run. That's because, by 2023, cryptocurrencies have become fairly well-known but not yet widely used. Mass adoption is the goal, but the focus is shifting towards encouraging usage.
Big Institutions
Now, big institutions are getting involved. Banks are getting regulatory approval to provide digital asset services. Visa and Mastercard are more active in the crypto world. BlackRock, one of the world's biggest investment firms, is seeking approval for a Bitcoin ETF. PayPal is also making major moves into digital currencies, including launching its own stablecoin, PayPal USD.
Institutional involvement represents a longer-term cycle compared to individual adoption. Institutions have their own decision-making processes and regulatory compliance to navigate, which takes time. Unlike individual investors who can quickly buy Bitcoin, institutions operate on a different timeline. But when they decide to buy, they do so in much larger quantities, potentially having a bigger impact on the market.
This changes the supply and demand balance. Institutions can significantly influence it because they can invest a lot more money.
Miners
The heart of a halving event remains the miners. These individuals or groups spend money to secure the Bitcoin network, investing in machines and electricity, hoping to earn more than they spend. Most of a miner's income comes from the new Bitcoin issued on the network, currently 6.25 per block. But after the upcoming halving in March 2024, this reward will drop to around 3.125 Bitcoin per block, essentially cutting miners' income in half.
Miners consider many factors, including the cost of their machines, which typically pay off over 4 years. Since Bitcoin mining needs to cover not only electricity but also generate profit, electricity prices matter a lot. Some miners benefit from very cheap electricity, while most pay between 4 to 7 cents per kilowatt-hour. At these rates, the cost of mining one Bitcoin ranges from $18,000 to $22,000, depending on various factors. When Bitcoin approaches $20,000, it gets tough for miners to cover their electricity costs.
Mining difficulty, a metric reflecting the total computing power on the Bitcoin network, is crucial to watch. A drop in mining profitability, usually linked to bear markets, leads to lower mining difficulty. As miners turn off their machines because it's not profitable, Bitcoin becomes concentrated in fewer hands, rebalancing the market. However, this is temporary, as major mining companies often release more efficient machines before halving events.
Also, miners are increasingly relying on transaction fees for income. While this used to be a small part of their earnings, the growing use of Bitcoin and related tokens has led to higher transaction fees. This trend could continue and become significant when the block reward is reduced, as transaction fees will make up a bigger part of miners' income.
Closing Thought
The next bull run might not see the same media frenzy as before, mainly due to fewer new people left to discover cryptocurrencies. Institutions entering the market will have a big impact due to their longer-term approach and financial strength. Miners will play a vital role, with the upcoming halving event and changing dynamics around their profitability. These, along with external events, regulatory changes, and market sentiment, will shape the cryptocurrency world.
As of now, the halving is only 185 days away. It's an exciting time in the cryptocurrency space, and it'll be fascinating to see how these factors unfold.
