The upcoming halving and possible futures of bitcoin

Bitcoin’s upcoming halving is stirring quite the buzz, dividing opinions between sky-high expectations and cautionary forecasts. With ETF successes making headlines and regulatory eyes watching closely, the crypto landscape is ripe for speculation. 

Predictions about the price of bitcoin after the upcoming halving vary: while optimists expect a further rise to $100,000, bankers at JP Morgan warn of a possible price correction. Bitcoin has also been helped by the success of bitcoin exchange-traded funds (ETFs), particularly the fund managed by Blackrock, which has reached a value of over $10 billion. Halving, a phenomenon that cuts daily bitcoin production in half, is more symbolic this time around, but is drawing attention to cryptocurrency investments. Does this currency really have a future?  

Bitcoin is limited in quantity, 21 million coins to be precise, which ensures its rarity – as long as people believe in it, it shall not, at least in theory, not lose value, like a digital gold of some sort. The idea of an inflation-proof economy based on bitcoin sounds almost laughable these days, with bitcoin bouncing up and down. However, as Ruchir Sharma from Morgan Stanley, points out in his article on Financial Times, people are nevertheless looking for an alternative to fiat currencies whose value can be negatively affected by, for example, uncontrolled money printing by central banks. 

Which brings us to the next point. Bitcoin is, at least in theory, resistant to financial and political manipulation, as Pelicoin points out. It offers an interesting deflationary model that can lead to a more stable and predictable monetary policy based on mathematics instead of depending on government or central bank decisions – this is the power of the blockchain, where all transactions are transparently written and publicly available, while not changeable. In a traditional financial system, central banks and governments can influence the value of their currency through policies such as quantitative easing. Bitcoin, belonging to no state or central authority, offers the potential for a fairer economic system where the value of the currency is determined by market forces and is equally available to all users regardless of their geographic or political location. This, of course, comes with potential risks, as the impossibility of state intervention means that bitcoin can be used for illegal payments and activities.

Moreover, despite this theoretical impartiality, there are paradoxical views that bitcoin could strengthen the US position in the world economy, writes CoinMarketCap. Given that the U.S. has a significant amount of bitcoin as well as significant capacity to mine it, monetizing this asset could provide benefits both in the form of revenue for the US Internal Revenue fond (IRS) from capital gains taxes. It is also argued that Bitcoin could help in defending against other, authoritarian, centrally controlled digital currencies such as the digital Yuan. However, it is  of course debatable if bitcoin would serve its initial purpose if it was to be controlled by USA.

Whether will Bitcoin take its place as a cornerstone of a new economic paradigm or succumb to the pressures of regulatory and market challenges is a story still unfolding. One thing is clear, though: the path of Bitcoin is as unpredictable as it is fascinating.

Author: Oldřich Příklenk

Picture: openai.com