Bitcoin halving, BTC ETF hype driving price up into 2024

The potential approval of spot Bitcoin exchange-traded funds (ETFs), the looming BTC mining reward halving and major regulatory and enforcement actions have a profound psychological effect on market prices.

This is a key takeaway from the Next Block Expo conference in Berlin, just as Bitcoin tipped past $42,000 for the first time in over a year.

Animoca Brands CEO Robby Yung, gumi Cryptos Capital managing partner Miko Matsumura, Binance regional manager Jonas Jünger, and Polkastarter business development lead João Leite weighed in on whether the current cryptocurrency bear market was coming to an end in a conversation with Cointelegraph.

Bitcoin halving is a psychological phenomenon

Considering the influence of the four-year cycle between Bitcoin (BTC) mining reward halvings, Matsumura likens the rhythm to that of a medieval battering ram.

“Every four years, we swing the ram, and we smash. Four years is long enough that the people inside the castle think we’ve gone away,” the venture capitalist explains.

Matsumura says that the halving cycle involves an inherent Schelling focal point mechanism, which is a game theory concept and social phenomenon where people or organizations can coordinate without communication.

“It’s important to think about it as a psychological training phenomenon because each time it works, it inclines people to go with it the next time it happens.”

He also suggests that Bitcoin’s stock-to-flow model clearly shows that the actual cut in BTC supply is getting smaller with each halving, which means “the actual mathematical economic effect is smaller.”

Cointelegraph’s Gareth Jenkinson alongside Matsumura, Yung, Jünger and Leite during the Next Block Expo in Berlin. Source: Cointelegraph

Jünger echoes these sentiments by highlighting the deflationary mechanism of the Bitcoin protocol and that there’s never talk of halving the fiat money supply.

“It’s just such a foreign concept to everything with fiat money that every time it occurs, it’s just such a celebration of we’re doing something completely different here.”

Yung provides another interesting perspective, noting that while Animoca Brands has just two projects that directly work in the Bitcoin ecosystem out of some 500 investments, the preeminent blockchain remains “very impactful” in what it does.

The Animoca CEO says the effect is similar to any business where interest rates, employment figures and other big macroeconomic signals have an impact even if they’re not directly impacting you.

“So, for us, I think Bitcoin is our central bank. With that in mind, I think of Ethereum as our investment bank.”

After all these years, I finally met @mikojava IRL when we got a chance to do a panel today at @nextblockexpo in Berlin. TL;DR? We’re emerging from the bear market, and the honey badger is getting fat (ask Miko). pic.twitter.com/h0PslG3DK9

— Robby Yung ⦿⦿⦿ (@viewfromhk) December 5, 2023

Bitcoin ETFs and consumer protection

The pending approval of several spot Bitcoin ETFs in the United States is being widely cited as a significant driver of BTC’s recent appreciation in value into the mid $40,000 range. Yung offers a very short takeaway as to why this is the case:

“The potential income from bitcoin ETFs is estimated to be $10 to $12 billion.”

For an exchange like Binance, the potential for an immediate price spike is another important consideration that could test the systems of a number of global exchange operators.

“These kinds of events are critical in running the exchange. It’s a matter of succeed or fail in terms of providing the underlying infrastructure when the news goes out and you see that green wick,” Jünger explains.

Binance’s regional director adds that consumer protection is set to fundamentally change with the provision of a spot Bitcoin ETF, which provides a compelling proposition that will drive investment into the asset class:

“All of a sudden, with this ETF vehicle, you will no longer have synthetic financial instruments that reflect the price of Bitcoin. You have an actual spot. It’s all secured. It’s all in custody.”

A cautious approach

While there is a sense of euphoria and talk of crypto winter beginning to thaw, Leite offers a sobering perspective given Polkastarter’s role in incubating and guiding cryptocurrency startups through a tough two years.

“During the bull market euphoria, a lot of companies overspent; they didn’t build a treasury, which is super important,” Leite explains. While those that have survived are looking ahead to better times, he advocates for a cautious approach:

“We still advise them not to mind that everyone is excited. You must have a long-term intelligence; make sure that you have a runway for a few years.”

The recent enforcement action against Binance and its subsequent $4.3 billion settlement with the U.S. Justice Department was also described as a positive development for the wider industry that assuages any fears of the future operations of the world’s largest exchange by transaction volume.

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