Bitcoin has seen three halving events, the last being in May 2020. But another is coming up in April - can investors expect a surge? Image Credit: Shutterstock

Dubai: Gold hit an all-time high. US markets kept going higher.

Dollar’s gaining too. Even Donald Trump’s Truth Social has just had a bounce on its Nasdaq opening. All this after last week’s US Fed meeting that kept interest rates unchanged, but provided some signals of impending cuts from current highs this year itself.

Amidst all this, one asset class – Bitcoin – continues to remain relatively stable at $70,000, though near enough to its peak of $73,000 struck on March 13. But you will not have Bitcoin investors in the UAE complaining, because since mid-February the crypto has been on a merry ride. By end of that month, it cleared $60,000 and then the burst through to $73,000 levels.

“UAE investors are in the ‘divest some and hold the rest’ strategy on Bitcoin,” said an analyst. “The upturn caught them by surprise, and now they want to see how high this rally will take it. Even those who wanted desperately to sell off in the last year are preferring to hold.

“So far, there are no Bitcoin holders using the price surge to buy new properties or buildings in the UAE, as had happened during 2017-19. Everyone’s waiting…”

 Waiting for the ‘halving’

Investors sure are waiting - and that’s for the Bitcoin will go through its next ‘halving’, a periodic event in the lifecycle of the cryptocurrency. And with the next one coming in April. The ‘halving’ process – of which there have been three in its history - has also been the trigger for more Bitcoin price gains.

Bitcoin halvings have led to significant price increases due to the reduction in the rate at which new coins are created, ultimately leading to a decrease in the available supply. This scarcity tends to drive up demand - and consequently, the price

- Seyed Mohammad Alizadehfard of Phoenix Group

After this April’s halving, ‘many analysts have figures of $150,000 to $250,000 in 2025’ for where Bitcoin could be headed.

Just the sort of thing that investors want to see happen.

“Bitcoin has performed very early on into this cycle,” said David Kemmerer, co-founder and CEO of CoinLedger. “This has got many people excited about how high Bitcoin could rise in the coming year.

“The halving only adds to this, as history has proven that halving events can positively impact the price.”

What’s the buzz around ‘halving’?

In straight-forward terms, the halving process is all about reducing the Bitcoins in production.

Given that Bitcoin is ‘mined’, ‘crypto miners use dedicated computers to solve algorithmic puzzles and find a specific value known as a ‘hash’,” said Mo Ali Yusuf, co-founder and CEO of Fuze. “This is done to verify and record transactions on a blockchain and the reward for miners is Bitcoin.

“To control how many Bitcoins enter the market and ensure its value, the Bitcoin code reduces the reward for miners every four years.

“We know in advance that the halving will occur every four years, down to the month - with only the exact day (being) dynamic. As we get closer to the halving, the timing becomes clearer as it depends on the number of blocks mined, not on specific calendar dates.

“The halving affects the supply of new Bitcoins entering the market and as supply decreases, if the demand remains constant or increases, the price rises.”

Every cycle of Bitcoin has established a new dynamic - the first brought about the existence of crypto exchanges, where people could buy, hold and sell Bitcoin. The second saw stablecoins pegged to fiat currencies (like USD) and the third saw more intricate developments in decentralized finance, the rise of NFTs and memecoins

- Mo Ali Yusuf of Fuze

What are UAE Bitcoin holders doing?

Some are not waiting to see whether post-halving, the crypto will soar to the $150,000-$250,000 levels that forecasts keep aiming for. In fact, based on market trends, there has been quite a bit of profit taking.

“Despite the surge hitting more than 50 per cent since January 2024, some investors closed their positions, especially around the psychological price level of $69,000,” said Bal Krishen, Chairman and CEO of Dubai-based Century Financial. “Given the increased volume in Bitcoin trades, our clients as such have not expressed any discontent with regard to the lack of liquidity while closing positions around the $69K mark.” (Early today (March 28), Bitcoin is trading at $69, 291, down 1.8 per cent.)

The majority of investors, though, will wait for the April halving to play out, in the hope that analyst expectations of a further spike will come to fruition. “Historically, such halving events have propelled Bitcoin prices to new all-time highs,” said Krishen.

“UAE residents, particularly in the age group of 18-24, are displaying growing interest in speculative investments in cryptocurrencies, driven by the recent approval of Bitcoin ETFs and the pursuit of higher returns in the face of inflation.”

Beat the inflation? That is definitely happening on Bitcoin returns. And to think mid-June 2022, it was in the doldrums of $24,200 plus levels.

If the crypto space is to grow it will only happen with the growth of Bitcoin, and hence should be the most integral part of anyone's crypto portfolio

- Bal Krishen of Century Financial

Investors can’t 'afford to' get carried away

By now, any Bitcoin investor should know that with the giddy price highs come stomach-churning lows. With cryptocurrencies in particular, entry and exit strategies need to be honed to near perfection. Even when that’s nowhere near possible, keep learning.

“While historical trends can provide insights, the cryptocurrency market is highly volatile and influenced by factors such as market demand, regulatory developments, technological advancements, and macroeconomic conditions,” said Seyed Mohammad Alizadehfard of ADX-listed Phoenix Group, the digital asset mining and hosting company. (Phoenix had reported $100 million plus from gains on digital assets on a FTVPL (fair value through profit or loss) basis in its 2023 results.) 

“Past halving in 2012 and 2016 resulted in significant price growth in the following months and years. In May 2020, the third halving event caused a price surge from $9,734 to $67,549 by November 2021, a 7x increase.

“However, in August 2022, the crypto market experienced a downturn as UAE-based Bitcoin investors saw their investment drop sharply below $21,500, much lower than their initial investment. Despite this, Bitcoin rebounded to an all-time high of $73,750 on March 14 displaying cryptocurrency's remarkable volatility.

“And potential for high returns…”

The deadline to April’s halving is ticking along. Only the day and time of the actual event still remains to be confirmed, even though consensus suggests April 17.

Will the coming days throw up more Bitcoin surprises and shocks?

The recent surge in Bitcoin prices has obviously increased attention on the overall blockchain ecosystem, including mining operations.

- Abdumalik Mirakhmedov of GDA
Amidst Bitcoin price focus, pay attention to its mining too
“While price movements grab most of the headlines, the real transformative impact of Bitcoin stems from its decentralized and transparent design as a monetary system. Robust and sustainable mining operations are essential for ensuring the integrity and longevity of the bitcoin network.

Miners generate revenue in two ways - from Bitcoin rewards received for discovering new blocks, and from transaction fees. The block rewards are predetermined and distributed automatically by the Bitcoin network, regardless of demand.

Transaction fees, however, depend on the number of transactions occurring on the bitcoin network and overall activity levels. Over the past year, we've witnessed a rise in transaction fees as bitcoin usage grows, and we’re excited by the continued development and adoption of the Bitcoin ecosystem."

- Abdumalik Mirakhmedov, Executive President of GDA, one of the world’s largest bitcoin mining companies in terms of hash rate.