Bitcoin Halving, Ethereum ETF: The Most Important Trends in the Cryptocurrency Market 2024by@leonidcryptonstudio
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Bitcoin Halving, Ethereum ETF: The Most Important Trends in the Cryptocurrency Market 2024

by Leonid ShaydenkoApril 5th, 2024
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The upcoming Bitcoin halving in April 2024 is poised to reshape market dynamics as miner rewards are slashed. Concurrently, the approval of Bitcoin ETFs is amplifying investor interest, while the Ethereum Dencun upgrade, featuring proto-danksharding, promises enhanced scalability and reduced fees. However, the full impact of these developments remains uncertain, with regulatory changes, technical innovations, and macroeconomic conditions also exerting influence.
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The upcoming bitcoin halving is a significant event that happens about once every 4 years and is of great importance to the entire crypto industry.

The year 2024 has seen and is expected to see several important milestones for the crypto industry: the approval of the Bitcoin ETF, the Ethereum Dencun upgrade, as well as the upcoming bitcoin halving and the possible approval of the Ethereum ETF. These events reflect important milestones in the development of the cryptocurrency space and are attracting increasing attention from investors and the general public.

In this article, I will dive into the specifics of bitcoin, review the nature of the halving and its significance, compare bitcoin to ethereum, and discuss other key events. The rapid growth of this sector inevitably leads to many questions and discussions, and this article will help you better understand the nature of the ongoing changes and their implications.

What is bitcoin?

Bitcoin is the first and most famous cryptocurrency that was created in 2009. It is a digital currency powered by blockchain technology that allows users to make decentralized transactions. This means there is no centralized control in this network and no need for a third party. It was designed to be a non-inflationary cryptocurrency, and the mechanisms that limit the issuance of the new BTC cryptocurrency are fundamentally built into the Bitcoin protocol itself. The mechanism that ensures a permanent reduction in issuance is called halving. Let's take a look at how it works. The bitcoin network is organized into nodes. Each node maintains identical copies of the blockchain. These copies are agreed upon by the nodes according to rules called a consensus mechanism.

Proof of Work (PoW) consensus is used in bitcoin. Proof of Work is a mechanism that ensures the safety and reliability of the bitcoin network. As part of PoW, miners use special hardware to solve complex mathematical challenges. When a miner solves such a challenge faster than other ones, he creates a new block with transactions and adds it to the blockchain, receiving a reward in the form of BTC cryptocurrency. According to the rules built into the protocol, new blocks are formed by miners about every 10 minutes.

This means that bitcoin issuance takes place as miners are rewarded for forming blocks. In fact, all BTC that are created in the network are miners' rewards for mined blocks. Bitcoin is divided into smaller units - they are called "Satoshi".

Satoshi is the smallest unit of bitcoin and represents one hundred millionth part of bitcoin.

  • 1 Satoshi = 0.00000001 Bitcoin (BTC)

  • 100 Satoshi = 0.000001 Bitcoin (BTC)

  • 10 000 Satoshi = 0.0001 Bitcoin (BTC)

  • 1 000 000 Satoshi = 0.01 Bitcoin (BTC)

  • 10 000 000 Satoshi = 0.1 Bitcoin (BTC)

  • 100 000 000 Satoshi = 1 Bitcoin (BTC)

What is halving?

Halving is an event in the bitcoin protocol where the mining reward for creating a new block is reduced by half. It occurs approximately every 4 years and is a built-in mechanism that limits the total number of bitcoins that can be created.

Halving is hugely important for bitcoin, as this event directly affects its economic model. As the miners reward for each block decreases, the number of new bitcoins coming into circulation also decreases, which helps maintain bitcoin's value in the long-term.

The bitcoin protocol was designed with the idea of a limited supply. The protocol includes a rule that limits the maximum total number of bitcoins that can be created. This limit is 21 million bitcoins and its issuance will stop by 2140.

When the bitcoin blockchain was launched in 2009, the reward to miners for a new block was 50 BTC, which is its issuance. During the history of bitcoin there have already been 3 halving, in 2012, 2016 and 2020. In 2012, the first bitcoin halving took place and the miners' reward for mining a block decreased from 50 BTC to 25 BTC, in 2016 during bitcoin halving the miners' reward per block was already reduced to 12.5 BTC, and in 2020 after bitcoin halving the miners' reward per block became only 6.25 BTC.

The next bitcoin halving will occur in April 2024 and miners' reward per block will be reduced from 6.25 BTC to 3.125 BTC.

Illustration of halving and the change in miners' reward per block in BTC with each halving. From 2009 to 2024

The impact of bitcoin halving on its price and market dynamics is significant. The expectations associated with halving that supply will decrease and demand will increase often leads to positive market sentiment. The decrease in available bitcoins after halving creates scarce demand, which in turn increases their price and makes this cryptocurrency more attractive to investors.

However, it is important to realize that past performance does not guarantee that it will be repeated in the future, and the price of the bitcoin cryptocurrency can be affected by various factors other than halving events. In addition, an increase in the price of the bitcoin cryptocurrency following halving events may also be justified by an increase in press coverage of cryptocurrencies or an increase in real-world options for its use. Although past bitcoin halvings have stimulated a bullish trend of bitcoin cryptocurrency price in the long term, one should keep in mind the unpredictability of the market.

What is Ethereum?

 Ethereum as a blockchain with a network which supports smart contracts (decentralized applications)

Ethereum is the second largest capitalized cryptocurrency after bitcoin. It is a decentralized protocol based on blockchain technology. It was launched in 2015 and its key idea is to support smart contracts that allow creation of decentralized applications. Smart contracts are programs that are hosted and running in the Ethereum environment.

Anyone can deploy smart contracts on the network or interact with existing ones. The advantage of this model is that there is no need to trust third parties or intermediaries. There are a huge number of decentralized applications built on Etherium, from DeFi and NFT to decentralized autonomous organizations. It also opens up the possibility of tokenizing any tangible and intangible assets, which brings many benefits in the form of automating transactions and reducing transaction costs by eliminating the need for intermediaries. This is one of the major trends in the industry right now. Smart contracts also allow even traditional money to be tokenized, transferred and used in a decentralized digital world. The native cryptocurrency in Etherium is called Ether, and it is used to pay transaction fees on the network.

This means that Ether cryptocurrency is needed when sending any transaction that represents actions on the network. The Ether cryptocurrency is also divided into smaller parts. Up to 18 decimal places. The smallest unit is called Wei. Below is an example of converting Ether to Wei.

  • 1 Ether = 1000000000000000000 Wei
  • 0.01 Ether = 10000000000000000 Wei
  • 0.000000001 Ether = 1000000000 Wei
  • 0.000000000000001 Ether = 1000 Wei
  • 0.000000000000000001 Ether = 1 Wei

What is the difference between Ethereum and Bitcoin?

The main difference between Ethereum and Bitcoin lies in their functionality. Bitcoin provides the ability to send basic value transfer messages between users without the need for centralized intermediaries, and is designed primarily as a digital payment system. Ethereum, instead, extends this concept by allowing the creation of any kind of program (smart contracts) that can be executed on the network. Almost any decentralized applications can be created on Ethereum, which drives innovation and growth in various areas: decentralized finance, exchanges, tokenization of real-world assets and currencies, games, social networks, decentralized autonomous organizations, and others.

So unlike Bitcoin, Ethereum is focused not only on financial transactions, but also on creating digital decentralized ecosystems and applications.

Bitcoin ETF

BTC/USD price chart showing the bitcoin ETF approval period and bitcoin hitting an all-time high. Source: TradingView

The approval of the bitcoin ETF on January 10, 2024 had a significant impact on the cryptocurrency market as well as the price of bitcoin itself. Shortly after this event, the bitcoin price rallied from a level of around $46,000 to a new all-time high of around $73,740 within two months.

The approval of the spot bitcoin ETF opened up new opportunities for investors by giving them access to the digital currency through traditional investment accounts, leading to a visible increase in interest in bitcoin from institutional and individual investors.

The approval of bitcoin ETFs has also brought a new set of benefits. It has opened up opportunities for capital inflows from traditional financial markets, as bitcoin is now available to institutional investors who can do transactions through their regular brokerage accounts. Hedge funds, pension funds and other large institutional players who previously did not have access to this asset class can now do transactions in bitcoin ETFs.

The approval of bitcoin ETFs has also increased the liquidity of the cryptocurrency market, as it has stimulated more capital inflows and increased bitcoin trading activity. Increased liquidity may help improve the structure of this market and reduce volatility.

Thus, this event has the potential to affect the further progress of the cryptocurrency market and raise even more interest in bitcoin from investors. In general, this year is very significant for bitcoin, because its halving is expected ahead, which will reduce miners' reward per block by 2 times, which means that the issuance of new BTC will be reduced in the same amount.

Ethereum ETF

Requests for an Ethereum ETF have been submitted and a decision is expected to be made in the near future. Potentially, the approval of the Ethereum ETF could have a major impact on Ether and cryptocurrency market price rates in general. Approval of the Ethereum ETF could lead to increased demand for Ether cryptocurrency from investors, including institutional investors for whom it may become available, interested in diversification of their portfolios. Such an injection of capital could boost Ether's price and overall popularity. But it is important to realize that the impact on the exchange rate may be unpredictable and dependent on many other factors.

The possible approval of an etherium ETF also opens up new opportunities for investors by giving them access to Ether price movements through regular brokerage accounts. This will allow investors familiar with traditional investments to access new markets without having to manage digital wallets or navigate complex cryptocurrency exchanges.

Thus, the approval of an Ethereum ETF could make investing in the Ether cryptocurrency more accessible and attractive to a wide range of investors, opening up new horizons for capital inflows.

What's next?

The next major event that is expected is the bitcoin halving. According to the bitcoin protocol, the next halving will take place in April 2024, when the reward for miners for mining a block will be reduced from 6.25 BTC to a reward of only 3.125 BTC per block. This event could significantly affect bitcoin's market dynamics and raise investors' attention to its potential.

The approval of bitcoin ETFs has brought significant price impulse to the cryptocurrency market, and helped drive the bitcoin price to a new all-time high. The move has opened up new opportunities for investors, allowing them to invest through traditional investment accounts. The approval of the Ethereum ETF could also lead to increased investor interest in the Ether cryptocurrency.

It should be pointed out that one of the key factors that will also have an impact on cryptocurrency price rates is the Ethereum Dencun upgrade. This upgrade, which introduces proto-danksharding, not only improves the scalability of the Ethereum network, but also reduces fees in L2 rollups, which may become an additional motivation for investors and increase interest in the cryptocurrency market as a whole.

However, it is worth remembering that the actual impact of these events on cryptocurrency price rates can be complex and multifaceted. Other factors such as regulatory changes, technical innovations and macroeconomic conditions can also have a significant impact on market dynamics. Therefore, it is important to take all aspects into consideration and base your decisions on a multitude of other factors. Only time will tell the real impact of these events on the market and the crypto industry.

The information presented in this article is the subjective opinion of the author and should not be considered a recommendation or a call to action. The information presented in this article may be incomplete or not fully accurate and readers are advised to conduct their own research to confirm and supplement the information presented. Readers should understand that making any decisions based on this information involves risks, including loss of capital or other negative consequences. Readers are advised to seek professional advice and evaluate their own circumstances before making any decisions. The author shall not be liable for any loss or damage resulting from the use of information from this article. Not an investment recommendation.