Forbes: What impact will the halving have on BTC?

Source: Blockchain Knights

The crypto asset space is no stranger to price volatility or technological evolution, as the years since 2022 illustrate.

The spot BTC ETF may have attracted the majority of attention and investment, but this is just one example of the rapid development and maturation of the space, and also provides a template for how other crypto assets can achieve similar results.

In addition to price speculation continuing to drive investor interest, technological improvements are also happening in quick succession.

These technological improvements include, but are not limited to, the following.

The Ethereum ETH blockchain and community continue to drive operational improvements that will reduce costs and promote development over time. In particular, the reduction of gas fees through the Dencun upgrade will enable smart contracts to scale faster than expected.

As a result, the likelihood of enterprise adoption will increase, and blockchain-based organizations such as DAOs will continue to benefit.

Meanwhile, the market capitalization of stablecoins has also reached unprecedented levels since 2021, while NFTs are set to rise again after a catastrophic crash during the last bull run.

However, there is one technological upgrade that stands out from the rest and may bring different speculation and impacts, and that is the BTC halving.

Let’s take a look at what investors should pay attention to as this event approaches.

Since the BTC halving will reduce the number of BTC rewarded to miners by 50%, the focus of analysis and market attention will be on the impact of this event on the price of each BTC.

It is also difficult to predict price movements, especially for an asset class that is still in its nascent and rapidly developing stages like the Crypto asset industry, but investors do have evidence that may be helpful.

In each of the three previous halving events, the price at the end of the year when the halving occurred exceeded the price at the time of the halving event, including the halving event that occurred during the most recent bull run in 2020-2021.

The impact of the halving on investors seems relatively easy to understand, especially with BTC ETFs still attracting billions of inflows.

As BTC rewards decrease, this could lead miners to invest more in capital equipment to increase the likelihood of receiving these rewards, which in turn could lead to greater centralization in the sector. Coupled with existing political pressures on the industry, this could have unintended effects.

The energy halving could lead to increased investment and consolidation among BTC miners, while also creating the potential for more political scrutiny of operators in this space.

Given that multiple hearings have been held around miner electricity usage and that a 30% punitive tax is still being discussed, the U.S. BTC mining industry should brace for more scrutiny.

Specifically from an investment and analysis perspective, it should be noted that while U.S. investors (both individual and institutional) have expressed clear demand and preference for BTC, their enthusiasm for the mining industry has not been reflected by policymakers.

Investing in mining equipment has proven to be a volatile investment that does not always track the price of Crypto assets at a 1:1 ratio, and this dynamic will become more complicated as consolidation and lower returns emerge.

One thing that should be kept in mind is that as BTC becomes an established player in the investment world and even on a geopolitical level (such as in El Salvador), developing and retaining a competitive mining industry will likely become part of national policy discussions.

Even as the Crypto asset market continues to develop, expand, and mature, BTC remains a dominant force.

Whether it is the price per token, market capitalization, social media mentions, investment products, or investment amounts, BTC remains the undisputed leader of the Crypto asset market.

Any major changes around BTC will affect the sentiment and capital flows of other Crypto assets, and this halving event is no exception.

For example, the approval of a spot BTC ETF kicked off a bull run for BTC and almost all other Crypto assets.

The halving will definitely have a direct or indirect impact on the Crypto asset industry, and investors would be wise to monitor its impact in both the short and long term.

The halving is coming soon, and Crypto asset investors should be prepared for both the short and long term impacts of this event.