For investors considering a bitcoin (BTC) allocation, one of the most important features to understand is its supply constraints. These characteristics differentiate the world's largest cryptocurrency from other investable assets and include its: 

 

• Scarcity: Bitcoin’s fixed supply of 21 million is permanently capped and maintained by a vast, distributed network of computers (i.e., nodes).

• Disinflation: The rate of new BTC creation (inflation rate) diminishes regularly. Halvings achieve this by reducing miner rewards, increasing scarcity.

• Consistency: Halvings occur every four years and ensure a predictable and transparent reach of the supply cap. The next halving is scheduled for April 19.

 

Bitcoin’s supply and annualized inflation rate¹

In the past, halvings have triggered significant price increases in subsequent months, so it is reasonable to look at historical performance and anticipate a repeat of history. While it’s not possible to pinpoint exactly what drives performance, we believe the increasing demand from newly approved bitcoin ETFs in the US and a favorable macro landscape will help BTC reach a new all-time high in the next 12-18 months. However, the path in bull markets always includes corrections, similar to what we have seen over the last week, so we envision continued volatility on the way to BTC hitting a new high.  

 

What is important for investors to keep in mind is that halvings are reminders of the key aspects of Bitcoin that underpin its investment case. In the near term, there are three considerations for investors trying to better understand the impact of this next halving:

1. Price Potential: Past halvings suggest the strongest returns for BTC occur 12-18 months after the event. While Bitcoin has seen positive performance in the lead-up, history suggests further gains are likely.

2. Market Dynamics: Considering strong investor demand, exceeding $100,000 within 18 months post-halving is a reasonable expectation. Bitcoin's historical trajectory suggests a potential all-time high within this timeframe.

3. Inflation Rate: Halvings highlight Bitcoin's unchangeable monetary policy, particularly its disinflationary nature compared to traditional assets. BTC will soon boast the lowest inflation rate amongst gold and fiat currencies.

 

Beyond these points, the overall investment case for Bitcoin remains highly compelling as institutional adoption, fueled by ETF approvals, and recent network advancements have strengthened its prospects. We believe these dynamics are creating an attractive entry point for investors with long-term horizons.

To learn more about the Bitcoin Halving, see our primer here.

 

 1 _{Hashdex Research according to the theoretical supply schedule of Bitcoin since inception. Past halving years according to the dates of previous events, and projected future dates assuming average block times of 10 minutes until 2064.}

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