As Bitcoin Halving 2024 Nears, On-Chain Analyst Explains When He Expects BTC Price To Go ‘Ballistic’

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Bitcoin‘s built-in mechanism called halving controls its limited supply by reducing the rewards given to miners. This event takes place roughly every four years or after the mining of 210,000 blocks. In April 2024 (estimated), the current reward of 6.25 Bitcoins will be cut in half to 3.125 Bitcoins.

This mechanism serves two core purposes:

  1. Inflation Control: By gradually reducing the rate of new Bitcoin issuance, the halving safeguards against hyperinflation and maintains the currency’s scarcity over time. This aligns with Bitcoin’s deflationary model, intended to increase its purchasing power.
  2. Miner Incentives: While block rewards decrease, halvings are designed to occur alongside rising transaction fees. This ensures miners remain financially incentivized to continue securing the network, even with diminishing block rewards.

In the past, Bitcoin’s price has frequently risen following previous reductions in its supply through halving events. Nevertheless, it’s important to remember that connecting historical trends with future results comes with risks. Factors such as investor sentiment, regulatory decisions, and larger economic situations can significantly impact Bitcoin’s price.

The 2023 event signifies an important achievement, as it decreases the pace at which new bitcoins get added to circulation. This underlines Bitcoin’s dedication to maintaining a controlled and limited supply, setting it apart from conventional fiat currencies. Although its effect on market trends is still debatable, the halving underscores the fundamental principles of Bitcoin’s monetary framework.

Analyzing Bitcoin on-chain involves exploring the publicly available data stored on the Bitcoin blockchain. With every deal recorded, this data source is rich with insights into Bitcoin usage by individuals and institutions. This exploration extends beyond just current pricing; analysts seek trends in transaction values, observe patterns in Bitcoin wallet activity, trace Bitcoin movements to and from exchanges, and much more.

Bitcoin experts who analyze transactions on the blockchain function like skilled detectives. They follow the trails of major Bitcoin holders, or “whales,” to understand the overall market mood as their actions can greatly influence prices. By identifying new trends, such as an increase in certain transaction types, they uncover shifts in investor behavior. Additionally, these analysts scrutinize the data for any unusual activity or potential attempts to manipulate the market, as well as possible security vulnerabilities in Bitcoin.

Analyzing Bitcoin transactions directly on the blockchain holds significant value because it offers an untouched perspective into the cryptocurrency market. In contrast to examining price graphs, this technique delivers a more reliable basis for assessing the network’s condition. Occasionally, trends identified through on-chain examination can signal upcoming price shifts in Bitcoin, which is a valuable advantage for traders and investors. Essentially, this approach reveals Bitcoin’s essential foundations, shedding light on aspects such as real adoption statistics and the investment plans of users.

A well-known and accomplished Bitcoin expert with extensive experience in on-chain analysis is Willy Woo. Today, he expressed his views on Bitcoin through the social media platform X.

In a recent post on X, cryptocurrency analyst Willy Woo discusses several crucial aspects of the approaching Bitcoin halving. He explains how this event will affect the expansion of Bitcoin’s supply, as well as sheds light on the relevance of Bitcoin versus gold and the US dollar in terms of inflation.

  1. Bitcoin Halving: As we explained earlier, the “halving (or “halvening” as he calls it) refers to the event occurring approximately every four years (or every 210,000 blocks mined) in the Bitcoin network, where the reward for mining new blocks is halved. This mechanism is designed to gradually reduce the rate at which new Bitcoins are created until the maximum supply of 21 million is reached.
  2. Annual Supply Growth Reduction: According to Woo, currently, Bitcoin’s annual supply growth rate is 1.7%. This rate is determined by the number of new Bitcoins created and released as miner rewards over a year. Post-halving, this growth rate will drop to 0.85%. The reduction in the growth rate is significant because it directly impacts the inflation rate of Bitcoin, making it more scarce.
  3. Comparison to Gold: Woo mentions that Bitcoin’s post-halving supply growth rate of 0.85% is lower than gold’s supply growth rate of approximately 1.6%, a figure representing how much gold mining adds to the total gold supply each year. Gold’s supply is said to double every 44 years at this rate. By highlighting this comparison, Woo suggests that Bitcoin will become an even scarcer asset than gold in terms of annual supply increase, enhancing its appeal as a “digital gold” or store of value.
  4. USD Inflation Rate: The -1.7% figure for the USD likely refers to the real interest rate or the inflation-adjusted return on cash, indicating that holding USD is losing value in real terms due to inflation exceeding nominal interest rates. This contrasts with Bitcoin, which, due to its decreasing supply growth rate, could potentially increase in value over time.
  5. Bitcoin’s Potential Price Surge: Woo’s final point hints at the potential for Bitcoin’s price to “go ballistic” when the USD’s inflation rate returns to its “normal range” of 5-10%. This could mean that when inflation or interest rates normalize to levels where holding cash becomes even less attractive, Bitcoin, with its newly reduced supply growth rate and status as a scarce asset, could see a significant increase in demand and, consequently, price.

In approximately ten days, an event called the halvening will take place in the Bitcoin network. During this process, the annual increase of new Bitcoins entering circulation decreases from a 1.7% rate to only 0.85%. This reduction outperforms gold’s supply growth rate of 1.6%, which means gold’s supply doubles every 44 years. Currently, the US Dollar is experiencing a negative inflation rate of 1.7%. The typical range for inflation is between 5-10%. When inflation reverts back to this normal range, Bitcoin’s price could potentially surge significantly.

— Willy Woo (@woonomic) April 9, 2024

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2024-04-09 17:23