Why is Bitcoin price quiet after the 'halving'?

Instead of skyrocketing like the three previous "halvings", this year's most anticipated event did not help Bitcoin price improve significantly.

Bitcoin (BTC) has completed its "halving" at around 7am this morning, according to cryptocurrency data and analytics company CoinGecko. "Halving", an event that usually occurs every four years, was programmed into the Bitcoin network by its creator, Nakamoto Satoshi, and every 210,000 units mined, the reward for miners will be halved. Combined with a limited supply (maximum of 21 million units), the reward is getting smaller and smaller, creating scarcity for BTC to ensure the supply is always controlled.

Contrary to many predictions, the price of this coin was quite stable during the event, holding around 63,700 USD per unit. BTC has not had any strong price increases recently. Yesterday, the price dropped to a low of 59,685 USD and quickly rose back above 65,000 USD.

Typically, it takes several months after the event for Bitcoin prices to see a jump as the reduction in miner rewards takes time to sink in. In the past three halvings, the cryptocurrency took an average of five months to rally and could sustain the rally for about seven months.

However, this time around the halving, analysts expect Bitcoin's price action to be different as it has seen significant price increases, even hitting record highs before the event. As a result, the price expectations surrounding the halving seem to have diminished.

Brett Hillis, a fintech expert at Reed Smith, said: "It's hard to say whether the previous record high can limit Bitcoin's price increase after the 'halving'."

Meanwhile, JP Morgan analysts wrote in a new report released this week: "We do not expect Bitcoin price to increase after the 'halving' event as it completes the valuation cycle."

Instead, they expect BTC prices to fall after the halving as the coin has become overbought and venture capital funding for the crypto industry has been “sinking” this year. Goldman Sachs added that for Bitcoin to rally like previous halvings, macro conditions need to support investors to have a risk-taking mentality.

Another important reason for the quiet halving is that the US Federal Reserve (Fed) is still quite hesitant about the possibility of cutting interest rates, which makes investors cautious about pouring money into BTC and other risky assets.

Bitcoin enthusiasts have long been eagerly awaiting this event because the price of the world's largest cryptocurrency has always increased sharply after previous "halvings" in 2012, 2016 and 2020. Chris Gannatti - global head of research at asset management firm WisdomTree, called "halving one of the biggest events in crypto this year".

But many people are skeptical and consider it just a technical change, launched by speculators to increase the price of digital currency.

Financial regulators have long warned that Bitcoin is a high-risk asset with limited real-world use, although more and more people are starting to accept BTC-linked trading products. Andrew O'Neill, a cryptocurrency analyst at S&P Global, said he is "a little skeptical about the lessons that can be learned when predicting prices from previous 'halvings'." According to the expert, it is just one of the many factors that can boost Bitcoin's price.

The “halving” followed Bitcoin’s rally to an all-time high of over $73,750 in March. The coin also enjoyed a bull run that lasted almost all of 2023, with a strong recovery after a crash in 2022.

Bitcoin and other digital currencies have been supported by excitement around the US Securities and Exchange Commission's decision in January to approve spot Bitcoin ETFs, as well as expectations that central banks will cut interest rates. But recently, the digital currency has been under pressure amid escalating conflict in Iran and Israel, which has had a ripple effect across capital markets.

Xiao Gu (according to Reuters , CoinDesk )

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