Bitcoin approached the $74,000 mark in the previous week, sparking optimism among crypto enthusiasts for further gains despite experiencing a significant correction on Friday. One of the contributing factors to this optimism is the anticipated reduction in Bitcoin’s new issuance, commonly referred to as a “halving.”
A fundamental characteristic of Bitcoin is its predetermined rate of token increase. Each time Bitcoin miners successfully validate a block of transactions through a computational competition, new tokens are introduced into circulation. Currently, the reward for validating a block stands at 6.25 Bitcoins, equivalent to $437,500 at a price of $70,000 per Bitcoin. However, this reward is set to be halved to 3.125 Bitcoins in April during the next halving event. Halvings occur approximately every four years until the total number of Bitcoins in circulation reaches 21 million. With over 19.6 million Bitcoins already mined, only 1.4 million tokens remain to be issued. Given Bitcoin’s lack of intrinsic value and its reliance on supply and demand dynamics, halving events typically result in a restriction of supply, thereby influencing the price.
Historical data indicates that following the previous halving event in 2020, Bitcoin witnessed significant price appreciation, with an over 80% increase within six months and a staggering 500% surge a year later, according to crypto tax firm CoinLedger. The current surge in demand is further fueled by the introduction of new spot Bitcoin exchange-traded funds (ETFs). Zachary Townsend, CEO of a crypto-focused insurance firm, observes that the reduction in daily mined Bitcoin supply is likely to exert upward pressure on prices.
However, miners appear to be less optimistic about Bitcoin’s future trajectory. Despite experiencing significant gains in 2023, mining companies such as Marathon Digital and Riot Platforms have seen their stocks decline by 27% over the past month, contrasting with Bitcoin’s price surge of more than 40%.
Markets:
Bitcoin experienced volatility, reaching a high of $73,000 before retracting to around $69,000. Stocks faced challenges amidst concerning inflation data, with the U.S. consumer price index for February registering at 0.4%, or 3.2% year-over-year. Producer prices exceeded forecasts at 0.6%. Retail sales showed weakness, leading to a decline in tech stocks. For the week, the Dow industrials lost 0.02%, the S&P 500 fell 0.13%, and the Nasdaq Composite dropped 0.7%.
Companies:
The House passed a bill requiring ByteDance to divest its TikTok app or face a ban in the U.S. The National Association of Realtors agreed to pay $418 million in damages and abandon 6% commissions, pending approval by a federal judge. Boeing’s 737 Max failed 33 out of 89 regulatory audits, and the Justice Department is investigating potential criminal charges related to the Alaska Airlines blown-door incident. Coinbase Global announced plans to raise $1 billion in convertible debt as Bitcoin prices surged. Dollar Tree announced the closure of 1,000 Family Dollar stores.
Deals:
EQT agreed to acquire Equitrans Midstream for $5.5 billion in stock. Reddit initiated its initial public offering roadshow, aiming to raise $748 million with a valuation of up to $6.4 billion. Telegram founder Pavel Durov mentioned the possibility of an IPO after Telegram achieved profitability in 2025, boasting 900 million members. Alcoa agreed to acquire Australia’s Alumina for $2.2 billion. President Biden opposed Nippon Steel’s acquisition of U.S. Steel.
Next Week:
Tuesday 3/19: Bank of Japan announces its monetary-policy decision. Reserve Bank of Australia also announces its decision. Bank of England and Swiss National Bank follow suit on Thursday.
Wednesday 3/20: Micron Technology reports earnings, followed by Accenture, FedEx, lululemon athletica, and Nike on Thursday. Federal Open Market Committee announces its monetary-policy decision and releases an updated Summary of Economic Projections, with expectations of maintaining the federal-funds rate unchanged.