Berenberg Analysts: Bitcoin ‘Could Rally’ Near Next Year’s Halving Event

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According to a Berenberg research report, Bitcoin (BTC) may finally leave the crypto winter behind and outperform the market in the coming months.

Such a possibility could be due to a combination of circumstances, developments and timing, the Hamburg-based multinational investment bank reported.

Notably, the analysts write, Bitcoin is virtually the only digital asset to qualify as a commodity rather than a security by the U.S. Securities and Exchange Commission (SEC), the decentralized nature of its blockchain protocol, as well as the upcoming reduction in half of Bitcoin that will see the rate at which new coins are produced and put into circulation cut in half, according to report author Mark Palmer.

Halving halves miner rewards. Currently, miners earn a reward of 6.25 Bitcoins; next spring, that number will be 3,125.

Historically, Bitcoin halving events have been associated with a significant rise in the price of the asset, and Berenberg considers the next one to be no different. Additionally, the upcoming halving could also serve as a catalyst by extension, for MicroStrategy shares, the largest company holding Bitcoin reserves at around 140,000 BTC.

If history is any guide, then we believe the price of Bitcoin could rally before and after this highly anticipated halving, with MSTR shares providing a leveraged way for investors to take advantage of this event, read the report.

While Bitcoin price is up around 65% year-to-date, MSTR is up almost 120% over the period.

MicroStrategy stock closed Thursday’s trading session at $318.64, with Berenberg covering MSTR with a buy rating and price target of $430.

What is Bitcoin Halving?

The Bitcoin halving is an event that occurs roughly every four years, with the protocol specifying that there will only ever be 21 million Bitcoins. The halving is designed to gradually slow the creation of new coins until the last is mined in 2140.

Bitcoin’s first halving took place in November 2012, when the mining reward was reduced from 50 BTC to 25 BTC per block. The second halving took place in July 2016, reducing the reward to 12.5 BTC per block, and the third halving took place in May 2020, reducing the reward to 6.25 BTC per block.

The next Bitcoin halving is expected to take place at block 840,000, which is expected to occur around April 2024, with the mining reward set to be halved again.

The halving has important implications for Bitcoin supply and demand dynamics. The slowdown in the rate at which new Bitcoins are created makes the asset slightly rarer.

On the other hand, the halving makes mining less profitable for miners, as they receive fewer Bitcoins for the same amount of work. This can lead to a decrease in network hashrate and increased competition among miners.

What other factors can increase the price of Bitcoin?

Berenberg also argues that Bitcoin’s recent appreciation can be seen as an indication that more and more investors are recognizing it as a sensible alternative not only among crypto tokens, but also in a global financial context.

The banking crisis earlier this year, the report says, also had a “lingering impact” on traditional finance, even saying that investors lost confidence in the Federal Reserve “due to its perceived mismanagement of the currency cycle. interest rate”.

The bank said these macroeconomic factors have raised concerns about dedollarization, the process of reducing or eliminating the use of the U.S. dollar in international trade and financial transactions, and could potentially highlight the value proposition. bitcoin as an alternative currency.

This is also what MSTR stocks could benefit from if investors increasingly turn to Bitcoin as an alternative currency, the report says.

As such, we believe Bitcoin has become a safe haven relative to other crypto tokens, and this advantageous position could boost demand, the report reads.

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