It hasn’t been easy to go through the Bitcoin market over the past couple of years, with fluctuations and price losses being the rule of the day for the crypto environment. Macroeconomics, the uncertainty that came from regulations and the fact that many exchanges started failing and collapsing, and the unyielding losses and stagnation caused significant erosion in the price levels, from which the marketplace is still recovering. And while 2023 was believed to be the year when things change, it seems now that 2024 will bring considerable gains into the environment. If you’re an investor, you’re probably started researching how to buy Bitcoin again.
Mining difficulty
The next halving event is expected to arrive sometime in April and will bring the rewards for miners to half their previous level. These events are set to drive scarcity, a factor that contributes to Bitcoin’s unchallenged value on the market, as well as its enduring appeal for investors who rush to add it to their portfolios, thereby increasing engagement levels. The Bitcoin mining difficulty is measured based on the difficulty of the mathematical problems and puzzles used in the mining process.
As of February 16th, the value stood at 80 trillion. The hash rate, which measures the network’s total computational power, climbed to nearly 563 exhashes per second. This means that the mining difficulty reached record levels of 81.73 trillion. Since January 2023, these figures have been climbing steadily, and many investors expect them to reach 100 trillion during the second quarter at the latest. Bitcoin’s proof-of-work consensus mechanism requires more computational power than the proof-of-stake used by the Ethereum blockchain.
The mining difficulty has more than doubled only during the past twelve months. Current data shows that as much as 20% of the current rate might go offline following the halving.
Market structure
The latest research shows that Bitcoin ETFs have the ability to change the crypto demand-supply ratio. This would be a way to counterbalance the sell pressure resulting from halving. Historical data has consistently shown that massive price appreciation follows halving events typically between six to twelve months after. This time, though, the exchange-traded funds are expected to affect pricing as well. However, investors are optimistic and believe that the current market structure is beneficial for post-halving events.
The current mining rate of 6.25 Bitcoin every minute means that roughly $14 billion annually. To maintain the same prices, it’s necessary to keep the same pressure consistently. In the aftermath of the April 2024 halving, the requirements will decrease in half. That means that only 3,125 coins will be mined per block. Naturally, that means $7 billion yearly. The move lowers the sales pressure. Rewards are cut in half as well, and the rate at which new coins enter the network decreases.
Outcomes
The first and most crucial aspect for miners is a 50% reduction in their revenue. But that doesn’t mean that the costs will decrease as well. In fact, it is unlikely that they will even remain the same. The most likely scenario is that they will increase in order to maintain stable profit rates. When cost pressures mount, miners tend to sell more of their inventory as well. That results in a direct increase in the supply and losses in the price range.
The fact that nine exchange-traded funds came on Wall Street will help with the overall sell pressure and reshape the market by providing new demand sources that are steady in nature. So far, ETFs have been well-received, something that shouldn’t come as a surprise considering how widely anticipated they have been. Their first twenty trading sessions were completed on February 9th, reaching the $10 billion milestone in AUM. Black Rock’s products are at the top of the list, with $4 billion, according to research.
$7.7 billion
In the last days of February, the Bitcoin spot ETF volumes managed to reach another record, with no less than $7.7 billion traded. These figures were more than double compared with the highs of just a few days before. US exchange-traded funds managed to set new records for the daily trading volumes. This is good news right ahead of spring, as it means that the asset class will continue to grow and develop throughout the following months.
Again, BlackRock took the lion’s share of the assets, with roughly 43.5% of the total, or over $3 billion. The asset manager has also succeeded in doubling its previous daily record. While in their aftermath, many investors were disappointed that ETFs didn’t create higher prices, it seems that it was only a matter of time before engagement levels skyrocketed.
As more become aware of the advantages of adding exchange-traded funds to their portfolios, it’s very likely that the gains yielded by ETFs will continue to mount. The second and third places are occupied by Grayscale Bitcoin Trust and Fidelity Wise Origin Bitcoin Fund, with $1.86 and $1.44 billion in volume, respectively. On February 28th, there were approximately half a million individual trades.
Pricing
As of February, the Bitcoin price managed to regain the elusive $60,000 peak that has not been reached since November 2021. Back then, Bitcoin was at its all-time high levels, steadily approaching $70K. That is before it encountered a massive correction, and also a significant portion of its value throughout 2022. Now, investors expect that it will go back to that peak and even exceed it in 2025. The halving could, theoretically, provide Bitcoin with enough power so that it climbs above $80,000.
There are some investors who believe the $100,000 level could finally be achieved, and the more optimistic think Bitcoin has the potential to climb even above that. It remains to be seen how far Bitcoin will rally, and what strategies investors will have to adopt. It is certain that a bullish movement is very much possible and that the crypto market of 2024 will be very different from those in previous years.
If you’re an investor, make sure to pay attention to all the market changes that could intervene along the way in order to protect your portfolio. Since the crypto marketplace changes so quickly, being prepared is the only way to ensure your assets are secure.sta
The New Jersey Digest is a new jersey magazine that has chronicled daily life in the Garden State for over 10 years.