Why does the bitcoin halving impact the price of other cryptocurrencies?

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The bitcoin (BTC) halving, an event that puts the world's eyes on the digital currency, is scheduled to take place around April 20. This event is practically synonymous with a 'bull run', that is, the kickoff of a period of strong growth for the price of bitcoin. However, it also has significant repercussions on the cryptocurrency market, in general. This happens because cryptocurrencies tend to follow the price of bitcoin (BTC). When bitcoin goes up, almost the entire market goes up too, and vice versa. In the case of bitcoin, its price usually increases because the halving reduces the issuance of new BTC by half, which reduces the supply that is launched on the market. That, by simple law of supply and demand, is bullish for BTC as long as demand remains constant or increases. At the next event The reward per mined block will go from 6.25 BTC to 3.125 BTC. Then other arguments are added, such as that of CoinShares, an analysis firm in the cryptocurrency space, which considers that the Bitcoin halving is seen as «a great marketing event.» The role of traditional media can drive interest not only in bitcoin, but in cryptocurrencies in general. This is because media coverage of the halving can increase awareness and interest in bitcoin, which attracts new investors and increases demand for both the main digital currency and the rest of the cryptocurrencies on the market. This perception reflects the importance and The impact that the halving has on the psychology of investors and in the dynamics of the market as a whole. The retail investor sector was especially influenced by the expectations generated around the halving. This may lead to greater investment in altcoins as they seek assets with even greater growth potential, in some cases, than that of bitcoin. Altcoins, because they have a smaller market capitalization, are more volatile and—percentageally speaking—tend to provide greater profits (and also greater losses if not operated properly). The belief in the inevitable rise of bitcoin after the halving becomes a kind of self-fulfilling prophecy. The perception that the event will boost the price of BTC and, by extension, other cryptocurrencies, motivates investors to act accordingly.

The Bitcoin halving and its effect on other cryptocurrencies

To better understand how the Bitcoin halving impacts the price of other cryptocurrencies, we can analyze the following historical examples. After the May 2020 halving, the crypto asset Chainlink (LINK) and MATIC, a cryptocurrency from the Polygon network, experienced significant growth in their prices. This took hold a year after the event.. LINK performed optimally 12 months after the halving, passing a price from $3.5 to an all-time high of $52 per unit, representing an increase of 1,385%, as seen in the following TradingView graph. Something similar happened with MATIC, at the time of the halving in 2020 it had a price of $0.020 and after a year, its price reached $1.86. That is to say, the digital asset had an increase of 9,200%, as reflected by TradingView. These examples illustrate how the Bitcoin halving can have long-term effects on the price of other cryptocurrencies, since the expectations generated by this event influence market dynamics and the investment decisions of participants. After each halving, a pattern has been observed in which the price of bitcoin experiences a significant increase in the following months, which carries over to other cryptocurrencies. Hence increases are seen in the aforementioned digital assets.