In an exclusive interview with Kadan Stadelmann, CTO of non-custodial wallet and atomic swap DEX platform Komodo, we discussed the implications that the upcoming halving might have on Bitcoin and the broader cryptocurrency market.
The Bitcoin halving is almost here, and all eyes are on the flagship cryptocurrency. This key event will slash block rewards in half, affecting the premiere cryptocurrency’s supply and availability.
Investors and market observers are currently divided on how such an event might impact Bitcoin’s future trajectory. Some claim that Bitcoin will follow past trends, while others believe this market cycle is different.
Kadan Stadelmann, who has been leading Komodo since 2016, shared a number of insights on the what the future may hold for Bitcoin.
What are your thoughts on this Bitcoin halving? Do you think the halving will drive public interest in crypto?
Each Bitcoin halving is important because it reduces the amount of new BTC mined each block, leading to supply shock. Because Bitcoin halvings have historically kicked off new bull market cycles, there is a lot of optimism surrounding them within the crypto community. As a result of price increases, mainstream media outlets have started to talk about Bitcoin and other cryptocurrencies more positively and more often, which leads to greater interest from retail investors and institutional investors alike.
What about the risks? Will the halving impact the number of miners since the costs per token will double? What effect would that have, if any?
There is a definite possibility that the 2024 halving or future halvings will reduce mining profitability, leading to fewer miners. However, if the price per Bitcoin continues to increase over time, it should at least partially offset the potential losses from the reduced mining reward. We’re also likely to see more large-scale corporate enterprises begin to mine Bitcoin.
Institutional demand has been touted as a key propellent for sparking the 2024 bull run. Do you think the demand is big enough to create a supply shock?
There is enough institutional demand to create a supply shock. From the demand side, the inflow of capital into Bitcoin ETFs has been massive. It took just seven weeks to reach the same inflow level that took gold ETFs three years to achieve. MicroStrategy is also ramping up its purchases. On March 11, Michael Saylor announced the purchase of 12,000 BTC for $821.7 million and days later announced plans to raise an additional $500 million to acquire more. From the supply side, April’s Bitcoin halving will reduce new supply issued by one-half. Combined, these events are enough to create a major sense of FOMO among investors.
Do you mean the demand is already priced, or is it yet to kick in?
During the early part of the current market cycle, it appears that retail demand is lagging behind institutional demand. However, it’s also possible that a large percentage of retail demand from this cycle is being met by spot Bitcoin ETFs. In other words, there is potentially a cohort of first-time crypto investors who have chosen to purchase Bitcoin indirectly via ETFs, rather than via crypto exchanges.
And do you think the halving will inspire confidence among retail investors?
Generally speaking, the halving inspires market confidence for a couple of reasons. First, it’s a counter-narrative to fiat currency. Investors know that Bitcoin is becoming more deflationary, consistently every four years. Meanwhile, fiat currency is becoming more inflationary on a regular basis, as demonstrated by this week’s disappointing US economic numbers (CPI and PPI). Second, the entire crypto market is usually propelled by the success of Bitcoin. Bitcoin typically gains more market value post-halving, leading to a lot of media attention. As a result, so do numerous other cryptocurrencies.
We have seen in the past that altcoins always tend to follow Bitcoin. Do you see any particular altcoin benefiting from the halving?
It’s difficult to pinpoint one specific cryptocurrency that is likely to benefit the most from the Bitcoin halving. Rather, the vast majority of cryptocurrencies will likely go up in value sometime during the second half of 2024 and through early 2025. When deciding which cryptocurrency to buy, it’s crucial to look at whether it offers long-term value — independent of crypto market trends — by considering factors such as tokenomics, technology, and use cases.
Coming to the most anticipated question, how do you estimate the price of Bitcoin to respond after halving? Let’s say after a 3-month or a 6-month period.
BTC may trade sideways for 3 months after the halving, due to sell-offs from miners. However, across the longer term (i.e. 6 to 12 months), BTC price should increase if the historical post-halving trend repeats itself this cycle. I expect this bull cycle to go strong through 2025, and would not be surprised to see it continue up from there with the institutional demand being seen so early.
And what about the more immediate implications of halving the Bitcoin price?
The price of Bitcoin is highly volatile, leading up to the halving. Although the market looks very bearish at the moment, this has been the norm around previous halvings. During the post-halving period, just when people think Bitcoin will remain dormant or even bearish, the market historically wakes up extremely quickly.
So, are you bullish on Bitcoin?
I am bullish on the mid to long-term future of Bitcoin. Based on the current amount of new adoption among institutional investors and the proliferation of spot Bitcoin ETFs, Bitcoin may reach $100k by the end of the year. After a major Bitcoin rally starts, we are likely to see a market-wide rally for most altcoins later this year or early 2025.
