Bitcoin is expected to halve on Saturday. Deutsche Bank: The market has partially priced it in and is not expected to surge significantly

This Saturday Beijing time, the cryptocurrency world is expected to witness a major event - Bitcoin may undergo its fourth halving. Deutsche Bank recently released a research report stating that historically, Bitcoin's price tends to rise after halving, but the correlation between Bitcoin's price and stock indices has weakened recently, with little expected spillover effect on the market. The bank believes that the current halving market has been partially priced in, so Bitcoin's price is not expected to increase significantly, but it is anticipated to remain at high levels in the future.

Bitcoin halving occurs approximately every four years. During this process, the number of new Bitcoins miners receive for validating transactions is halved. This is done to maintain the scarcity of Bitcoin and control its inflation rate over time. The last halving occurred in May 2020, reducing the miner reward from 12.5 Bitcoins per block to 6.25 Bitcoins. The upcoming fourth halving is scheduled for April 2024, further reducing the reward to 3.125 Bitcoins.

Subsequently, the halving process will continue until the circulating supply of Bitcoin reaches its predetermined limit of 21 million, expected to happen in 2140. After reaching this limit, crypto miners will only profit from transaction fees, which are determined by the size of the transaction and the amount of data involved. Currently, there are 19.7 million Bitcoins in circulation.

Typically, miners are forced to adjust their computing power utilization to adapt to the reduced profitability of mining activities. So far, the daily average miner income in April is $68 million.

As a variant of Bitcoin, the performance of Bitcoin Cash after halving can serve as a reference. After successfully completing halving on April 3, 2023, the price of Bitcoin Cash rose by 12% between April 3 and 4. The main difference between Bitcoin Cash and Bitcoin lies in block size, with Bitcoin Cash being able to process 32 times more transaction information than Bitcoin, resulting in faster transaction verification. Therefore, the halving event is favorable for Bitcoin Cash.

Historical Data: Prices Generally Rise After Halving, Correlation with Stock Indices Weakens

Historically, price fluctuations before and after Bitcoin halving events have attracted widespread attention. In the 30 days leading up to the halving events in 2012, 2016, and 2020, Bitcoin prices rose by 5%, 13%, and 27% respectively. Furthermore, halving events have also driven the growth of Bitcoin addresses, especially in the 150 days after halving, where the number of newly created Bitcoin addresses increased by 83%, 101%, and 11% respectively.

Bitcoin is often seen as the "North Star" of the crypto market. Since 2024, Bitcoin has had an 82% correlation in returns with Ethereum (the second largest cryptocurrency). While historically Bitcoin's price has been highly correlated with major US stock indices, its correlation with the S&P 500 and Nasdaq has weakened since the FTX crisis in 2022 The relevance of 2024 so far is only 16% and 15% respectively. Therefore, this halving is expected to not cause too many spillover effects on the broader financial markets.

In addition, the hash rate of Bitcoin usually decreases after halving, as some miners exit the market due to reduced profits. The hash rate refers to the total computing power used to mine and process Bitcoin transactions. After halving, due to reduced mining rewards, the process of guessing hashes and adding blocks to the blockchain becomes less profitable, and the hash rate usually decreases.

Data shows that after the previous three Bitcoin halvings, the hash rate decreased by 25%, 11%, and 25% respectively. A lower hash rate may affect the network's security, but the hash rate usually recovers in the medium term. In the past three halvings, the network recovered to the pre-halving hash rate level within an average of 57 days. The current high price of Bitcoin may also limit this short-term hash rate decline, as Bitcoin miners have seen record profits before halving.

Conclusion: Prices will not rise significantly, mining activities will shift to low-cost areas

Deutsche Bank believes that the market has partially anticipated the Bitcoin halving event, so it does not expect a significant price increase in Bitcoin. After the halving event, it is expected that the Bitcoin price will remain high, due to factors such as the expected approval of Ethereum spot ETF in the future, major central bank interest rate cuts, and regulatory changes.

Furthermore, with the increase in Layer-2 Solutions and DeFi activities, Deutsche Bank believes that the prospects for the Bitcoin ecosystem and the broader cryptocurrency field have become very favorable. After the halving event, it is expected that there will be a shift in mining geography, as lower block rewards squeeze profit margins, forcing miners to seek cheaper and more reliable sources of energy. Currently, the U.S. accounts for 40% of mining, China 15%, and Russia 20%. Latin America, Asia, Africa, and the Middle East have attracted miners' attention due to low energy costs. Within the U.S., crypto mining may still be centered in Texas.

Bitcoin rose 1.55% to $64,499.40 at noon on Friday Eastern Time.