At K33, we expect speculators to yet again front-run the event, as they have in all past halving events. On average, bitcoin has appreciated 14% over the month leading up to the halving, and we would not be surprised if 2024 would be in line with this.
The bitcoin price is always determined by the net demand for holding bitcoin. With a given amount of bitcoin available at any point in time, its value must adjust until investors realize their desired allocations, denominated in e.g. USD.
The current inflation rate is around 1.8%, around the same as for gold, and will drop to 0.9% in late April. This means that without a change in demand, the halving should only trigger a 0.9% price increase over the first year after the halving, relative to what would be the case without the halving.
Without a change in demand, the market cap should stay fixed. With 1.8% yearly inflation in the stock of bitcoin, the price must drop 1.8% for the market cap to stay the same. With 0.9% inflation, the drop would only need to be 0.9%.
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