In a recent research report, Berenberg predicted that bitcoin could soon reclaim the spotlight it once had in the crypto world, despite much of the attention shifting towards other crypto tokens and projects in recent years. The report stated that, as US regulators are cracking down on the industry, every token appears at risk of being labelled a security and becoming subject to an enforcement action, except for bitcoin. The report further suggested that bitcoin’s price appreciation in the last few months indicated that more investors are recognising it as a sensible alternative not only among crypto tokens, but within a global financial context. There are other key positive factors on the horizon for bitcoin too, as explained below.
De-Dollarisation
According to the report, the US banking crisis and concerns over the Federal Reserve’s interest rate policies have led some countries reducing their exposure to the dollar, giving rise to issues around de-dollarisation. As a potential currency hedge, the trend of de-dollarising – moving to divest themselves of the currency or somehow minimise exposure to it – could “highlight bitcoin’s value proposition”.
The Fourth Bitcoin Halving
In addition, bitcoin will have another critical event starting in May of 2024. The halving, or the reward given to miners who create new bitcoins to improve demand/supply equilibrium in the market and ease downward pressures on the Bitcoin network, happens around once every four years. A bitcoin halving event will see the rate at which new BTC coins are created, reduced for a temporary period. It’s possible that the fourth-ever bitcoin halving event will spur considerable positive price momentum for the asset, as the previous three have markedly had such effects.
The Lightning Network
Lastly, the report highlights the growth of the bitcoin blockchain’s functionality. Specifically, the Lightning Network, a tool that reports suggest improve transaction scalability, has been gaining traction recently. Channels created by end-users on Bitcoin’s Lightning Network (LN) can attain many more transactions per second than a conventional “on-chain” transaction. The ultrafast platform processes transactions without registering them directly and reducing pressure on the main protocol by removing the number of transactions that Blockchain deals with itself.
[h/t Will Canny]