Bitcoin’s (BTC) growing dominance over the last 15 years signifies the importance of the mechanisms creator Satoshi Nakamoto devised to overcome the shortcomings of the fiat ecosystem — one of them being halving.
Nakamoto invented the Bitcoin halving mechanism, which reduces the BTC rewards for mining over time to slow down the issuance of the limited 21 million BTC. The Bitcoin halving in 2024—like the previous three halving events—is set to leave a long-lasting impact on Bitcoin as well as the countless altcoin ecosystems it helped create over the years.
Altcoins will react differently to the Bitcoin halving depending on various factors, including tokenomics, value proposition and its overall contribution toward financial freedom. The Bitcoin Halving 2024 will put five key dimensions of altcoins to the test — market sentiment, market price, technology stack, blockchain forks and allocation of reserves.
Changing investor sentiment
The Bitcoin market heavily influences the investment patterns of crypto investors. Given that the Bitcoin price has soared after every halving, investors are eyeing altcoins that have the potential to skyrocket post-halving.
Bitcoin’s stellar price appreciation and retention across 2024 have boosted investors’ confidence. As a result, current market sentiment suggests that many investors are anticipating an altcoin boom.
Speaking to Cointelegraph, the BNB Chain core development team echoed the market sentiment, stating that “The Bitcoin halving is known for triggering shifts in market sentiment within the Web3 ecosystem.”
Related: Is the Bitcoin halving the right time to invest in BTC?
According to the BNB (BNB) developers, projects with solid fundamentals and innovative technologies attract more investors’ attention during Bitcoin halving events. Altcoin projects are prepping new incentive programs and campaigns to attract crypto opportunists.
“On our end, we are seeing more initiatives aimed at fostering ecosystem growth and innovation,” the team added.
Upgrades in technology stack
Bitcoin halvings often serve as a catalyst for innovation and evolution within the broader Web3 technology stack. And for altcoins, this technological catch-up is made possible by consistent and prolonged support from the developer community. Advancements in the Bitcoin network serve as a blueprint for altcoin ecosystems as they cater to the rising public demand for faster transactions, improved utility, and price appreciation, among others.
Mo Shaikh, co-founder and CEO of Aptos Labs, told Cointelegraph, "The Bitcoin halving underscores the exploding global interest in Web3. Across Aptos ecosystem and beyond, we are seeing near webscale utility potential for millions—and soon billions—of people in DeFi, gaming, and entertainment.”
The core BNB developers underscored the importance of updating the underlying technology to address specific market needs and enhance a token’s utility and adoption. In-house initiatives and support programs targeted toward incentivisng builders “encourage technological advancements and ecosystem growth,” which ensure that the ecosystem is primed for long-term success.
Speaking to Cointelegraph, Stefan Kimmel, CEO of the M2, revealed that the crypto exchange's strategy aligns with the upcoming halving that is set to permanently reduce the issuance of Bitcoin. Kimmel added:
“Looking at the broader landscape, while halving garners attention, we are cognizant that it’s just a part of a larger narrative. The confluence of ETFs, quantitative easing, and halving will define the future contours of the market.”
Similarly, aspiring future-ready projects must pick and choose the right upgrades in tune with Bitcoin halcving 2024.
Altcoin price movement
The altcoin ecosystem reciprocates the price movements in Bitcoin. However, some tokens will outperform others during the bull market. Investors monitor short-term volatility in altcoins around the time of Bitcoin halving, intending to add altcoins into their portfolio.
The halving has historically impacted Bitcoin’s price dynamics, which has reverberated through the altcoin market. The team added:
“Staying informed and identifying altcoins with strong fundamentals and promising growth trajectories remain paramount for profitable trades.”
Additionally, changes in Bitcoin’s mining rewards and difficulty post-halving may indirectly affect altcoin mining profitability, influencing miners' behavior and potentially impacting altcoin prices.
According to Kimmel, M2 plans to remain focused on delivering solid yield products and fostering cryptocurrency adoption and innovation, irrespective of these cyclical events.
Related: ‘Bitcoin-only’ buy-and-hold investing outperforms altcoins over long term, analysis shows
Consensus-based blockchain forks
The changes accompanying Bitcoin halvings often bring forth particular challenges that require community members of altcoin ecosystems to vote on ‘make or break’ decisions.
Diverging economic incentives for miners, farmers and stakers coupled with community disagreements and governance issues often result in soft and hard forks.
Consensus-based blockchain forks may be a solution to address disagreements within the community. These forks can create new cryptocurrencies with modified protocols designed to meet the needs and preferences of specific factions within the community.
On the other hand, some communities prefer working on the existing blockchain rather than building one from scratch. For example, BNB Chain core developers revealed they are working on BNB Beacon Chain Fusion, an upgrade dedicated to making the BNB Chain ecosystem more efficient. BNB Smart Chain (BSC) is also introducing a major upgrade, BEP 336, with the mainnet hard fork scheduled for June.
Related: Generation Z and millennials choose crypto over stocks — Report
Bitcoin reserves allocation
Investors looking for greater return on investment (ROI) post-halving often reallocate some of their Bitcoin holdings into various altcoins. Diversification, as an investment strategy, increases one’s chances of higher returns and helps spread risk across different assets.
On the flip side, altcoin projects have been found to increase their Bitcoin allocation in the treasury to minimize volatility. Explaining the intent, BNB Chain core devs added:
“Altcoins with strong use cases, supportive communities, and promising growth prospects may attract a portion of Bitcoin reserves, contributing to increased liquidity and trading volume in the altcoin ecosystem.”
Investors should take a ‘do your own research (DYOR)’ approach when delving into altcoin investments. Background checks about the founder and their team, audit reports, and market credibility are some factors to consider when researching new altcoin projects.
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