Several industry insiders predict that Ethereum and the larger cryptocurrency market would benefit from the halving of Bitcoin. Numerous elements contribute to the impending Bitcoin BTC tally down to $72,165, with April’s halving becoming the most eagerly awaited event in cryptocurrency history.

There have already been three Bitcoin halvings: on November 28, 2012, July 9, 2016, and May 11, 2020. This time, the halving coincides with the approval of the first-ever spot Bitcoin exchange-traded funds (ETFs) in the United States by the Securities and Exchange Commission (SEC). Which has further increased the excitement around the occasion.

There are other factors besides ETFs that are raising expectations. The head of institutions and fintech at Safe, the company that makes SafeWallet, Julian Grigo. The Bitcoin halving serves as a crucial reminder of what makes Bitcoin unique from conventional money.

This halving of Bitcoin occurs after a period of above-average worldwide inflation

“An asset with a fixed supply is really appealing to investors after two years of higher inflation in the U.S. and the eurozone and even higher in other economic areas,” Grigo stated. “The halving of Bitcoin will act as a prompt to remember that.”

It brings to the attention of spectators and investors worldwide one of the salient characteristics of Bitcoin: a fixed supply schedule that is unchangeable. In this sense, national state currencies like the US dollar are very different from Bitcoin and other cryptocurrencies. But according to Grigo, Ether ETH is even more limited in supply. tickers down at $4,041currently.

The amount of Bitcoin is still increasing, although more slowly. On the other hand, there is a real shortage of ether. In light of that, Ether presents itself as an even more superior store of value. Consequently, I wouldn’t be shocked if Ether benefited from the halving event even more than Bitcoin,” he remarked.

Price increases and market turbulence

According to Joey Garcia, director of Xapo Bank’s public affairs, policy, and regulation. Ethereum and the market as a whole would benefit from the halving.

Garcia states, “the mechanism aims to replicate the deflationary and scarcity nature of precious metals.” “It’s interesting to consider the indirect effect this could have on Ethereum and the wider market,” he continues.

Garcia sees the halving as a boost to market sentiment, potentially benefiting ecosystems like Ethereum by creating scarcity, reducing mining rewards from 6.25 BTC to 3.125 BTC. Alun Evans highlights its broader impact, suggesting Ethereum could gain as investors diversify, spurred by Bitcoin’s scarcity and potential price jumps post-halving.

The price of Ether (purple) rose with that of Bitcoin (blue) following the halving in May 2020. Source: TradingView

Evans issues a warning, saying that a sudden surge in ETH’s value after the half of Bitcoin would not be totally advantageous. He emphasizes that Ethereum powers numerous applications and smart contracts, despite Bitcoin often being perceived solely as a digital currency or payment method. However, an unstable market may hinder the use and growth of ETH. Evans emphasizes the significance of responding to market shifts by stating, “As Ethereum’s network costs increase, alternative layer-1 and layer-2 solutions will be key for enhancing scalability and reducing fees, ensuring Ethereum remains user-friendly and affordable for developers.”

Is it anything else, or the halving?

Some analysts are debating whether Bitcoin’s halving alone is driving recent market surges, pointing to additional catalysts. Siddharth Lalwani of Range Protocol suggests that Ethereum’s recent price gains might not be solely due to Bitcoin’s halving. Lalwani highlights Ethereum’s Dencun upgrade in March and the prospect of spot Ethereum ETF approvals by the SEC in May as significant factors. He anticipates short-term pressure on Ethereum as liquidity shifts towards Bitcoin but foresees a bullish trend for the crypto market overall in 2024. Similarly, Jordi Alexander from Mantle emphasizes that Ethereum’s price surge is influenced by various industry milestones beyond the halving, including investor interest and planned upgrades.

“As long as these two assets continue to have buyers, new money inflows will keep coming in — but at some point, there will be no tokens left to buy […] We will eventually hit a point where token issuance becomes very low, and the supply squeeze will set in, leading to explosive movements.”

Aki Balogh, CEO of DLC.Link, bullish on Bitcoin due to halving. Ordinals, and MicroStrategy actions reducing supply, emphasizing high correlation with ETH.

To reduce [foreign exchange] risk, many hedge traders trade ETH and other tokens against BTC rather than US dollars. Thus, an increase in BTC will also raise the value of ETH and other tokens, he explained.

“The Bitcoin halving is a megaphone for crypto as a new asset class. Ethereum might have the loudest echo,” as Grigo succinctly puts it.