The 2024 Bitcoin Halving Is Still Playing Out. Here’s What to Expect Next.

The Bitcoin (CRYPTO: BTC) halving event has perhaps been underappreciated this year. By sheer coincidence, the April 19 halving occurred at a time when the cryptocurrency market was obsessed with the SEC approving spot Bitcoin ETFs.

However, investors should not underestimate the importance of the 2024 Bitcoin halving. Even though it already happened more than a month ago, it will have ripple effects throughout the year and beyond.

Exactly what will happen next is anyone’s guess, but Bitcoin HODLers need to look not just to the SEC but to policymakers for clues. Like a certain yellow metal, Bitcoin’s value proposition comes from its limited supply, and understanding this is key to HODL with conviction.

Don’t try to time the halving rally

To summarize, the halving event in April 2024 reduced the reward for mining a Bitcoin block from 6.25 BTC to 3,125 BTC. This discourages and consequently slows down Bitcoin mining activity in order to maintain a relatively low circulating supply of tokens.

One can look at the previous three Bitcoin halvings and try to predict what will happen to the token price in the months following the halving event in April. But having such a small sample size makes such predictions almost meaningless.

In other words, don’t take the concept of “Bitcoin’s next move” too literally. By now, the highly efficient and forward-looking market has likely already priced in the expected positive impact of this year’s Bitcoin halving.

Bitcoin reached a new high around $73,000 in mid-March. This was the first time Bitcoin reached an all-time high before the halving event. But again, the sample size is too small to draw statistically significant conclusions here. Also this time, the halving was overshadowed by front page news regarding Bitcoin ETF approvals.

Despite a minor pullback near $73,000, Bitcoin’s rise since its late-2022 low of $16,000 has been staggering. Bitcoin tends to clear out the weakest hands before starting new bull cycles, so don’t be too surprised if the next price move is a pullback.

No matter what happens in the near term, stick to the mantra of “time in the market, not timing the market.” More importantly, know why you are investing in Bitcoin. Most likely, this will be due to deliberate limiting of supply, which is exactly the purpose of the halving.

“Digital gold” against the dollar

While this may not trigger the next move in Bitcoin, the trajectory of the US dollar will certainly inform Bitcoin throughout 2024. Bitcoin’s price (at least in the US) is measured against the dollar, and the dollar’s rise since the beginning of the year certainly hasn’t had that effect. It helped Bitcoin.

The story continues

So what could weaken the dollar this year? A change in central bank policy could help. Even the slightest hint of a rate cut from the Federal Reserve should pressure the dollar and provide a significant tailwind to Bitcoin.

Speaking of regulators, lawmakers, and other bigwigs, there’s currently a bill trying to make its way through Congress known as the Financial Innovation and Technology for the 21st Century Act, or informally known as Fit 21. If passed, Fit 21 would increase regulatory clarity for cryptocurrency, which would give Bitcoin a greater sense of legitimacy.

Both central bank policy changes and Fit 21 have the potential to be a game changer for Bitcoin price. But these events should not overshadow Bitcoin’s appeal as “digital gold.” Just as there is so much natural gold on Earth that can be mined, only 21 million Bitcoins will ever be produced. Therefore, the price of Bitcoin and gold does not tend to move in the opposite direction relative to the US dollar; They also serve as a hedge against the negative impact of inflation on the dollar.

If this year’s halving event caused Bitcoin’s inflation rate to drop below 1%, then the token could actually be as valid an inflation hedge as gold. In this context, Bitcoin’s next move should be on the back of its inevitable move against the US dollar. So whether lawmakers and regulators help or hinder Bitcoin in the coming months, the legacy of the 2024 halving will be a more favorable supply/demand balance for Bitcoin, perhaps making it as good an asset as gold if the dollar loses value.

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David Moadel has no position in any of the stocks mentioned. The Motley Fool has positions in Bitcoin and recommends it. The Motley Fool has a disclosure policy.

The 2024 Bitcoin Halving Is Still Ongoing. Here’s What to Expect Next originally published by The Motley Fool