Bitcoin, the world’s best known and arguably most successful crypto, will undergo a halving on the 12th May.
According to Simon Peters, analyst at investment platform eToro, the halving could not only see the price of bitcoin rise, as it has done following previous halvings, but it could also result in a whole new brand of crypto investors.
The halving, which will be the third time it has happened on bitcoin, will see the block halve from 12.5 to 6.25, and many analysts believe that a long bull run will follow.
With each extended bull run there has been an increased interest in bitcoin and crypto as an asset class, and with that has come a widening of the investor base, usually as a result of greater coverage in the mainstream media.
Peters explains: “During and after the first halving in 2012, the key investors were those already involved in the asset class. The bitcoin investor base was almost exclusively made up of those in the know; blockchain scientists and data programmers as well as libertarians interested in the idea of a monetary system outside of political influence and central bank control.”
Following the 2012 halving, bitcoin’s price went from $13 on the day to a peak of $230 within six months. But it was the 2016 halving that arguably provided a watershed moment for bitcoin as it led to the 2017/18 price rally, and subsequently brought the topic of crypto into public consciousness.
“After the halving in 2016, bitcoin exploded, both in terms of price and popularity. National newspapers were writing about bitcoin,” Peters continues. “Alongside the computer programmers and blockchain scientists were ordinary people, from management consultants to electricians and hairdressers. Suddenly bitcoin was on everyone’s lips.”
Peters noticed a massive uptick in people investing in bitcoin on the eToro platform during the 2016 halving and expects similar levels of investment again.
“In 2017 and 2018, 70% of people came to eToro to invest in crypto. Since then, the crypto industry has matured, with talks of regulation, institutional investors entering the market and even central banks expressing an interest in the asset class. Combine this with another price rally expected after the 2020 halving, and we could be on the precipice of crypto becoming a mainstay of investors' portfolios in the same way as stocks, bonds and commodities.” Peters says.
Similar to the last halving and subsequent price increase, more retail investors are expected to pile into crypto during this one from fears of missing out.
Peters added, “I get questions from clients asking if they have missed their chance to get into crypto. The price is currently hovering around the $9K mark and if it starts heading towards the $20K highs seen in the last rally, I expect even more people will want a slice of the action.”
A sustained price rally would likely accelerate policymakers’ discussions around crypto regulation in order to protect consumers.
Many believe regulation is the tipping point for IFAs and wealth managers to feel comfortable talking to their clients about the asset class. Perhaps in the next couple of years, the industry will have matured at a rate whereby including a crypto allocation in people’s pensions may not be such a ludicrous idea.
“There are already a number of instruments such as exchange traded notes that track cryptoassets, as well as investment companies that already have exposure to the asset class. As pension funds naturally respond to demand from their members, we may see a time where those demands include an allocation to cryptoassets.” Peters said.
Looking back at previous halvings, each one has led to the next crucial stage in bitcoin’s, and to an extent crypto’s, evolution. The months and years following this one could see new limits reached for bitcoin not only in terms of price but for increased regulation and adoption to follow.