Will the Halvening drive future digital asset bull markets?

By OSL Head of Distribution and Prime Matt Long

As Bitcoin approaches its third halvening in May, a number of factors are at play that suggest further dramatic growth is on the way for digital assets.

Global regulatory measures now being implemented are ushering Bitcoin out of the shadows once and for all. We are going to see institutions that have until now kept their distance entering into the fray with full confidence. Bitcoin, Ethereum and other digital assets are going to become a standard component of asset managers’ portfolios. Notably, we can also expect banks to start rolling out their own coins to the market.

Asia is leading this advance and is set to continue to be the global driver of adoption. Last week the South Korean government took steps to legalize digital assets, and the Supreme Court of India struck down curbs on digital asset trading.

Central bank monetary policy is increasingly aggressive and some have raised doubts on the US Fed’s ability to manage a deteriorating situation in light of historically low interest rates and the effects of both US and EU quantitative easing measures still being felt in the market. Prior to its recent slide, Bitcoin rallied 5% following the Fed’s emergency rate cut, suggesting a flight to ‘safety’ of an asset class which is resistant to inflationary measures.

As markets like Hong Kong, Singapore and others continue to introduce regulatory frameworks and licensed exchanges with a view to normalisation and simplification, widespread adoption of the digital asset class is already underway. 

In parallel to this trend of more mainstream adoption, we can expect to see nations start to take their currencies digital. China is seemingly now on the verge of launching a digital version of the Yuan. Running counter to the common criticism that digital assets and currencies are symbolic rather than usable, the government envisions the digitised Yuan ultimately replacing cash in consumer transactions.

Digital ‘natives’ naturally play a key role in fuelling the transition of digital assets into the mainstream. But as the world grows more unstable seemingly by the day, people at large are looking for new ways to grow, and crucially, protect their wealth. In this and other respects, Bitcoin has much in common with other supply-limited assets such as gold.

The fact that Bitcoin is up close to 25% this year does suggest that we should see it as a similarly safe haven, one that tends to grow during times of uncertainty. With a maximum supply of 21 million, Bitcoin eventually will be as scarce as gold. 

The last two halvenings saw extraordinary runs, with energy building up over a period of around six months post-event. No one can say with certainty what the effect of May’s halvening will be, but at the very least it will place the spotlight on Bitcoin at a time when digital assets are entering a position of unprecedented confidence. The markets look set to share that sentiment. 

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