By Dave Chapman, BC Group Executive Director
The approach of Bitcoin’s third halving (also referred to by the digital asset community as “The Halvening”), which will reduce the number of Bitcoins available on a given day by 900, comes at a time of extreme market volatility and investor caution. At the same time, demand remains high as digital assets enter a new phase of maturity. Adoption has risen at a steady pace globally over the past year, and a report by Deutsche Bank in January anticipates a community of around 200 million within the next decade.
There is good reason to believe such forecasts. In the current crisis, Bitcoin has shown itself to be resilient and, remarkably, is up more than 30% year-on-year. Assuming investors continue to appreciate the benefits of holding Bitcoin, and that the halving drives an increase in awareness, we can expect this event to prompt an accompanying surge in value. The appetite for risk hedging combined with the normalization of cryptocurrencies as an investment vehicle, with involvement from ETFs and the like, means this increase is likely to be sustained, even if it doesn’t match the bull runs that eventually followed the last two halvings in 2012 and 2016.
Google searches related to the halving already indicate a healthy mainstream interest in Bitcoin that was not previously evident. While no guarantee of intent, the more people there are who understand Bitcoin’s technology, the more chance there is that its price will continue to appreciate once markets have stabilized.
The increased demand that The Halvening is likely to stimulate could well extend to other digital assets. Bitcoin remains pre-eminent and sets the tone for the market. Bearing in mind that Bitcion emerged at a time of economic uncertainty comparable to the present sentiment, it’s realistic to expect more investors to take the opportunity to decamp from the existing mainstream system to build one that has the potential to be fully decentralized, comprising various protocols besides Bitcoin.
Stablecoins are a growing digital asset category and have continued to gain steam over the last few years. Last week, CoinDesk reported that the total supply of top five fiat-backed stablecoins increased by more than 25 percent, with Tether, a US dollar backed stablecoin running on the Ethereum network, seeing over $1.5 billion in issuance since a massive drop March 12 (now being called “Black Thursday”). Security tokens (also sometimes called STOs), which are blockchain-backed, tokenized representations of real-world securities, assets or rights, are another category to watch.
It’s near impossible to predict the future price of Bitcoin. What we can say with some confidence is that the Halvening and the ensuing media and investor interest around it will help raise the level of digital assets in the public consciousness.
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