Bitcoin could be in for a massive bull run ahead of the next halving event. The world’s largest cryptocurrency by market capitalization has already provided exceptional returns in 2023, with approximately an 80% climb year-to-date. At press time, the crypto asset was trading at $29,495, down over 2.71% in the past seven days.
The Bitcoin halving -also known as “the halvening”- is an event that cuts the rate at which new bitcoins are released into circulation in half. The rewards system is expected to continue until 2140 when the last bitcoin will be mined. Halvening attracts a lot of attention with the expectation that the decreasing number of new Bitcoins in circulation should theoretically drive up demand, leading to price increases.
The last Bitcoin halving occurred on May 11, 2020, which saw the number of Bitcoin entering circulation drop from 12.5 per block to 6.25 per block. Halvening occurs approximately every four years, with the next halving likely to happen around April 2024.
What To Expect
According to popular crypto analyst “Ali,” we can gain insights into how BTC prices will behave in the future “by examining the fees-to-rewards ratio as well as the cryptocurrency’s historical accumulation or distribution cycles.”
The fees-to-rewards ratio is crucial to the Bitcoin network’s financial health. As block rewards decrease due to halving events, transaction fees become a critical income source for miners.
“Higher ratio signals a healthy & sustainable network, boosting investor confidence & demand, and driving the price of BTC higher. Conversely, a lower ratio might raise concerns about long-term sustainability, affecting the price of BTC negatively,” Ali explained in an April 12 tweet.
Notably, the shift from accumulation to distribution can be predicted by the fees to reward on-chain data, which is currently spiking.
The Pundit further noted that the indicator suggests that the market has entered another accumulation cycle, similar to 2019 and 2020, prepping it for a further climb.
“This indicates a potential price rally leading up to the 2024 Bitcoin halving,” added Ali.
Timo Oinonen, an onchain analyst with Cryptoquant, also agreed with Ali’s assertions adding that both the fees to reward indicator and the 2019-based price model suggest Bitcoin will reach $46,092 by summer 2023.
“After reaching the 2019-based target price of 46,092 dollars, it’s easy to see Bitcoin reaching $100,000 in the aftermath of the 2024 halving event,” he wrote.
That said, while the fees-to-rewards ratio is a crucial factor in predicting the effects of the halving on Bitcoins price, other factors, such as market sentiment, macroeconomic conditions, and regulatory developments, could also play significant roles in determining the price of BTC.