Will Bitcoin's half-life cause a major rise?

Past performance does not always predict future results, but when the half-life is examined in detail, the resilience of Bitcoin and the possibility of a significant price increase become clear.

Approximately every 4 years, that is, every time 210,000 blocks are added to the blockchain, a half-life occurs, and payments given to miners for block resolution known as proof of work are reduced.

Since this is the main means for new bitcoins to circulate, a reduction in minor rewards will effectively lower the Bitcoin inflation rate. Now that the fourth half-life has passed, Bitcoin's inflation rate is only 0.85%, and the inflation rate is as low as gold. This process of lowering the inflation rate continues until 2140, when the last Bitcoin is scheduled to be mined, and supports a strong monetary policy that prioritizes scarcity and finiteness.

Since the half-life lowers the Bitcoin inflation rate, the dynamics surrounding Bitcoin demand and supply effectively change. As a result, even if demand is constant, it is necessary to raise prices to offset the decline in supply. Basically, the half-life brings about an increase in the price of Bitcoin.

This can be seen by analyzing the past performance of Bitcoin after its half-life. In the year when the half-life occurs, Bitcoin's return is usually around 125% on average. If this trend continues, the price will be 0.1 million dollars when measured from the beginning of 2024.

Even better, as the effect of the half-life becomes certain, it is usually several years after the half-life period that maximum benefit can be obtained. During this time, Bitcoin has grown by an average of nearly 400%. If this half-life follows a similar pattern, the price of Bitcoin could reach around 0.5 million dollars in 2025.

There is a possibility that the half-life alone will have a major impact on the price of Bitcoin, but there are several other developments that could make this half-life different from other half-lives. If we examine the current situation in more detail, we should see that these potential price targets are not as sensational as they might seem.

First, it is important to understand that while Bitcoin production volume changes depending on the half-life, this half-life is unique in that there was a supply shock. For the first time in history, the number of coins that can be used on exchanges during this half-life period has decreased from the previous time. Since peaking in May 2020, the total number of coins available on exchanges has declined sharply. Currently, there are approximately 2.2 million people, which is the lowest level since 2018.

Next, spot bitcoin ETFs appeared. In January, the Securities and Exchange Commission (SEC) approved 11 spot bitcoin ETFs, effectively opening the doors for new buyers to enter the bitcoin market. For individuals who are unfamiliar with cryptocurrency exchanges or lack the technical knowledge necessary to operate virtual currency exchanges, these ETFs provide a familiar and regulated means of accessing bitcoins through conventional intermediaries.

It's still early days, but you can see how popular ETFs are. In order to meet the accumulated demand, a total of 11 ETFs were purchased at a rate 10 times the daily production volume of bitcoins (about 900 bitcoins) in mid-February. The initial enthusiasm for buying has subsided, but if buying reaches this level again, ETFs will be purchased at 20 times the daily production volume now that the half-life has passed, and even greater pressure will be applied to Bitcoin prices.

Time will tell just how explosive this half-life will be for Bitcoin. However, there are reasons why we can be quite optimistic if we simply evaluate the impact of the half-life period and other factors such as existing supply shocks and the introduction of ETFs. As the effects of the half-life materialize over the next few months, the price of Bitcoin is currently hovering around 0.06 million6000 dollars.