The year has been marked by the rise in prices of digital assets, which broke new price records. In this bull market context, Binance, the largest global infrastructure provider for the blockchain and cryptocurrency ecosystem, has been reinforcing the importance of and its commitment to the sustainable growth of the ecosystem, and highlights education as an essential element for making informed decisions for each user. Today, more than ever, DYOR (“do your own research”) is essential for investments.
Day after day, new investors enter the crypto market attracted by favorable macroeconomic cycles, events and industry trends that can influence how investors perceive certain assets. And, consequently, impact prices. One of the most notable events of the moment is the Bitcoin (BTC) halving, when the remuneration for mining new BTCs is halved and discouraging supply. In the three previous editions, the halving had a positive impact on prices. This, however, is not guaranteed in this edition.
Although Binance does not comment on market variations or make recommendations on any type of investment, Guilherme Nazar, general director of Binance for Brazil, provides an analysis of what the upcoming BTC halving means for the crypto industry and the broader financial scenario. broad.
“The halving is an important event in the cryptocurrency market as it relates to the asset with the largest market capitalization. Naturally, there is positive expectation regarding the halving, as happened in the three previous events, as it essentially generates a supply shock. This is because the remuneration for miners is cut in half, creating an imbalance in the supply and demand relationship. However, this is not the only factor that can influence the price of BTC. Macroeconomic or specific factors, such as the approval of spot BTC ETFs in the United States this year, also impact the evolution of the asset’s price,” he commented.
It is necessary to understand what the so-called “Halving” is
The halving, which occurs every four years, is a crucial event that halves the reward for mining new blocks, consequently reducing the supply of new BTCs. Halvings are essentially deflationary because they increase scarcity of the world’s most popular cryptocurrency, which can influence demand and further reinforce the narrative of BTC as digital gold.
Historically, BTC has seen notable price increases in the six months following each halving event – 100% after the first, 36% in the second, and 83% in the third. These price dynamics indicate the market’s response to the reduced supply of new BTC and growing demand. While past performance is not indicative of future results, these historical trends provide insights into the potential impact of halving events on BTC price dynamics. Importantly, room for price growth depends on overall market sentiment, adoption rates, and other factors at play during the halving event period.
For example, recent approvals of spot BTC ETFs in the United States have increased demand and helped expand the cryptocurrency’s reach. New ETFs have already received billions of dollars in inflows. These exchange-traded funds open up the possibility for traditional investors to have cryptocurrencies in their portfolios. As a result, direct investment in BTC and various regulated instruments begin to coexist, allowing investment strategies and adapting to different risk profiles and preferences. This signals the possibility of a new era of adoption and legitimacy, not just for BTC, but also for the crypto space as a whole.
In this scenario, the halving that takes place in April 2024 is unique, as it occurs amid a series of other significant events in the crypto ecosystem in general.
While the above points appear to offer an optimistic outlook for BTC and the crypto market in general, it is important for investors, especially newcomers to the crypto space, to manage their expectations and always make informed decisions. Immediate price changes in the wake of the halving are not guaranteed, and their fundamental importance will manifest in longer trends in value, liquidity, adoption and the position and acceptance of the cryptocurrency as an asset.
Beyond the BTC price, the halving could have auspicious long-term effects across the entire ecosystem, with benefits extending to other assets and projects and spurring infrastructure building and product innovation in the space.
Investing in education to invest
In this context, more than ever, it is important that each user always does their own research, analyzes the platforms’ proposals based on their reputation and does not limit themselves to placing their money on those that promise high immediate returns. Making decisions based on reliable information is essential to reduce risks.
For those just starting out, the best way to take advantage of the benefits of the crypto world is to educate yourself, understanding the characteristics of the market and the different assets available. It is important to understand the fundamentals of blockchain technology, such as the different types of cryptocurrencies and market dynamics, before investing in any cryptocurrency.
For those looking to delve deeper, Binance Academy, the educational arm of Binance, offers a wide range of content on blockchain, cryptocurrencies and related technologies for all knowledge levels. The content is free and available in more than 30 languages, including Brazilian Portuguese.
