In 2024, Bitcoin has surged by an impressive 44% year-to-date, signaling a bullish trend that investors are closely monitoring.
With the highly anticipated halving event, the momentum is expected to accelerate further, potentially impacting not only Bitcoin but also other stocks and tokens in the cryptocurrency market. However, amidst this optimism, concerns loom for crypto miners, who may face challenges navigating the evolving landscape.
But what exactly is a halving?
Initially encoded into Bitcoin’s source code by its pseudonymous creator, Satoshi Nakamoto, a halving mandates a gradual reduction in the growth of Bitcoin’s supply.
Following the fourth one-of-its-kind event, miners solving complex mathematical problems to add new blocks to the Bitcoin blockchain were rewarded with only 3.125 bitcoins, half of the previous reward. This occurrence, happening every 10 minutes, was Bitcoin’s response to the risk of inflation that plagues traditional currencies. With a maximum supply of 21 million coins, approximately 19.7 million are currently in circulation, with the last bitcoin projected to be mined in 2140.
For investors, halvings have historically been bullish events. In 2012, Bitcoin’s price surged from $12 to over $100 within a year of its first halving. Similarly, during its second halving in 2016, Bitcoin’s value soared from $650 to nearly $20,000 by 2017 amidst the ICO bubble. Before the last halving in 2020, Bitcoin traded below $8,000; today, it commands a value of approx. $62,000.
Alternative Strategies To Benefit From A Potential Post-Halving Price Surge In The Cryptocurrency
Stocks
Bitcoin’s success often translates to profitability for Bitcoin miners, who operate energy-intensive servers to solve mathematical equations and create new Bitcoin blocks.
Since the last halving in May 2020, bitcoin has surged by an impressive 641%. Notably, the three largest publicly traded miners, Riot Platforms (RIOT), CleanSpark (CLSK), Marathon Digital Holdings (MARA), and have experienced significant gains of 406%, 612%, and 1,811% respectively.
However, despite their long-term success, mining stocks have struggled year-to-date. This underperformance can be attributed to several factors, including the impending halving, which reduces miner rewards by half, and increased competition from spot bitcoin ETFs.
Nevertheless, selective investment in mining stocks presents an opportunity, especially for the most efficient miners poised to weather the revenue shock post-halving.
Strategic considerations, such as cost efficiency and access to capital, will become increasingly crucial as block subsidies diminish. Mergers and acquisitions are expected to intensify as miners seek economies of scale to remain competitive in the evolving landscape.
According to industry experts, the future of mining stocks hinges on strategic adaptability and consolidation, suggesting potential transformations in the mining sector over the coming years.
Tokens
The potential benefits of bitcoin halvings extend beyond bitcoin itself to other cryptocurrencies closely associated with it. Speak to our digital asset management consultants to learn about the untapped capital within the bitcoin ecosystem, with tokens like Stx, Ordi, and Rune that could see significant gains if capital begins to rotate into the bitcoin narrative.
Rune, the native token of THORChain, facilitates decentralized token swaps across different blockchains. Despite a recent hack, Rune could benefit from bitcoin’s rise. Similarly, Stx, the native token of the Stacks protocol, enables decentralized applications on top of Bitcoin and has gained traction with an upcoming network upgrade. Ordi, a meme token based on the Ordinals protocol, surged in 2023 but faces challenges this year.
Traders anticipate a rush of new tokens using this standard. Experts predict increased interest in meme coins on the Bitcoin network.
Platforms like Runes are transforming it from a digital gold/store of value to a dynamic asset platform with various applications and native assets built on top of it. This expansion of the Bitcoin ecosystem represents a significant evolution since the last halving and could trigger a market frenzy in terms of transaction fees if successful. As new tokens are created and traded on the Runes platform, miners stand to benefit from increased transaction fees.
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Disclaimer: The information provided on this page is for educational and informational purposes only and should not be construed as financial advice. Crypto currency assets involve inherent risks, and past performance is not indicative of future results. Always conduct thorough research and consult with a qualified financial advisor before making investment decisions.
“The crypto currency and digital asset space is an emerging asset class that has not yet been regulated by the SEC and US Federal Government. None of the information provided by Kenson LLC should be considered as financial investment advice. Please consult your Registered Financial Advisor for guidance. Kenson LLC does not offer any products regulated by the SEC including, equities, registered securities, ETFs, stocks, bonds, or equivalents”
