Fueling the price

Crypto sector eagerly awaits Bitcoin halving

Bitcoin has recently experienced a strong upswing. According to market observers, this is mainly due to the upcoming halving in mid-April - the most important event in the crypto industry. For the Deputy CEO of the domestic crypto platform Bitpanda, Lukas Enzersdorfer-Konrad, this is primarily a "psychological event" that fuels demand for the currency and therefore the price.

The "halving" takes place cyclically every four years. The reward for "mining" new bitcoins, which the "miners" receive in exchange for their computing power, is halved. This is paid out directly in Bitcoin. Halving is firmly anchored in the cryptocurrency code and serves the purpose of regulating the production of new coins and preventing inflation - according to the Bitcoin algorithm, the total number of coins may not exceed 21 million.

In addition to the increased market expectations for the price trend, the halving also means that fewer coins come into circulation. The price rally in recent months is therefore the result of a combination of higher demand and the prospect of lower supply. "This results in an adjustment of the economic curve and therefore - as is usual on markets - a higher price," explains Enzersdorfer-Konrad.

Other factors
According to the expert, however, there are other reasons for the price fireworks: on the one hand, the introduction of an exchange-traded fund (ETF) based on Bitcoin has opened up the market for institutional investors. On the other hand, a new set of rules - the Markets in Crypto Assets Regulation (MiCAR) - came into force in the EU last June. According to the manager, this creates regulatory clarity for banks and other financial institutions and makes it easier for them to deal with cryptocurrencies.

The halving event is triggered by the creation of 210,000 new Bitcoin blocks. This year, this is likely to happen on April 20, although an exact date cannot be determined in advance. This is due to the fact that the "mining" of individual blocks is variable and the exact time of the "halving" can therefore only be estimated.

Further price jumps cannot be ruled out
Whether there could be further price jumps afterwards is, of course, an open question. According to Enzersdorfer-Konrad, however, this is certainly possible. Although the event is already largely priced in, there have always been increases in the months following the four halvings to date. This makes this year's event all the more exciting, he says.

After a long dry spell, the Bitcoin price had risen continuously since October 2023 before breaking through the threshold of 72,000 dollars (approx. 67,000 euros) in mid-March of this year with a new all-time record. Most recently, Bitcoin traded only slightly lower at just over 66,000 euros.

Ethereum also on the rise
In addition to the rise in Bitcoin, the price of Ethereum, the second-largest cryptocurrency by market capitalization, has also risen sharply recently. According to the Bitpanda manager, the reason for this is the strong interconnectedness of the industry. This is roughly comparable to other capital markets: If the situation - driven by macroeconomic trends - is good, many securities often gain in value at the same time.

Enzersdorfer-Konrad does not want to accept the criticism often leveled at cryptocurrencies, according to which they are driven purely by market noise and have no intrinsic value. There are indeed such currencies, such as "community projects" like the one around "Dogecoin". However, the majority of currencies are used to finance technology projects based on blockchains, which, according to Enzersdorfer-Konrad, form the basis for new digital infrastructures - just as the TCP/IP protocol was instrumental in the development of the internet.

High risk of loss
According to the manager, a "use case" and therefore exciting investment opportunities definitely exist. However, potential investors should be aware of the high volatility of cryptocurrencies. Although the return expectations for the asset class are high, the investment also entails a high risk of loss.

"Better positioned than ever before"
For Bitpanda itself, however, business is going well. The company has long since recovered from the turbulence surrounding the "crypto winter" that gripped the market after the outbreak of war in Ukraine in 2022, including the Austrian company. Bitpanda is currently "in a better position than ever before in the company's history, the past year was very profitable".

Bitpanda was founded in Vienna in 2014 and has since established itself as one of the largest crypto brokers in Europe. It currently employs 700 people.