Post-Halving Rally: Bitcoin Soars, Innovation Emerges as Future Driver

Thirty days after Bitcoin's fourth halving, its price remains slightly higher than it was immediately following the event. Historically, Bitcoin has experienced significant price increases within 180 days of halving events. While the asset has already set a new all-time high this year, factors such as wider adoption of spot Bitcoin ETFs and accelerating global adoption could impact its future price.

Bitcoin's Ascendance: The Post-Halving Rally and Beyond

As the dust settles from Bitcoin's fourth halving event, which transpired precisely thirty days ago on April 20th, the cryptocurrency community eagerly contemplates the asset's trajectory. Will it adhere to its customary post-halving upward surge, or will this cycle unfold differently?

Historically, Bitcoin's price has experienced "explosive gains" within 180 days of the halving event, which typically manifests around 30 days post-halving, according to Matthew Sigel, head of digital assets research at investment management firm VanEck.

However, this year has been marked by extraordinary circumstances. Not only has Bitcoin undergone its fourth halving, but it also scaled an all-time high of nearly $74,000 approximately a month prior to the event. This surge is largely attributed to the historic approval of eleven spot Bitcoin exchange traded funds (ETFs) in January. Last year, digital asset service provider Galaxy estimated the total addressable market size of a U.S. spot Bitcoin ETF to hover around $14 trillion within the first year of its inception.

Today, Bitcoin's price stands at $67,000, marginally higher than its $65,000 valuation one day after the fourth halving. This suggests that Bitcoin may once again align with its historical pattern of upward momentum. Nevertheless, with the halving, all-time high, and ETF launches now behind us, it begs the question: what other factors could shape Bitcoin's future price trajectory?

"2024 to date has been characterized by price action analysts primarily focusing on headlines, institutional engagement metrics, and ETF flows, in addition to the negative supply shock induced by [the] halving," opines Christopher Calicott, managing director at Bitcoin venture capital firm Trammell Venture Partners, in an interview with Unchained.

"What everyone seems to be uninterested in discussing at the moment is the meaningful long-term trend: persistent and accelerating global adoption of Bitcoin," he adds.

Accelerating Bitcoin Adoption

One aspect that has historically distinguished Bitcoin from other cryptocurrencies is its unwavering focus on its dual roles as digital currency and digital gold. The network's community has cultivated a reputation for conservatism and risk aversion in its approach to protocol development.

This paradigm shifted last year with the introduction of the Ordinals protocol, a contentious innovation that enables the creation of Bitcoin-native non-fungible tokens (NFTs). Despite resistance from respected contributors like Luke Dashjr, the Ordinals protocol has gained traction and even spawned related projects such as fungible token standards like BRC-20 and, more recently, Runes.

"I'm not sure creating a new fungible token protocol for Bitcoin is a good idea," Casey Rodarmor, the creator of Ordinals and Runes, wrote last year, before elaborating on his rationale for launching Runes.

"Creating a good fungible token protocol for Bitcoin might bring significant transaction fee revenue, developer mindshare, and users to Bitcoin," Rodarmor wrote.

Indeed, Runes, which was launched in conjunction with the Bitcoin halving, appears to have been a major contributor to the record-setting $108 million in transaction revenue generated by miners that day.

Bitcoin's Layer 2 Renaissance

The advent of Ordinals has significantly increased Bitcoin transaction volume, raising scalability concerns.

One response to these concerns has been a flurry of activity in layer 2 network development. Bitcoin already boasts a functioning layer 2 solution called Lightning, designed to render transactions more affordable and expeditious. However, some have criticized Lightning as a failure, and a multitude of alternative solutions are currently in development.

Unchained recently delved into this layer 2 phenomenon, which some hail as a "renaissance" in Bitcoin development.

BitVM is one such renaissance project that aims to introduce smart contracts to Bitcoin. Its website asserts, "BitVM enables a free market of second layers, potentially scaling Bitcoin to billions of users."

Robin Linus, the inventor of BitVM, shared with Unchained that he is developing a closely related layer 2 protocol called zkCoins, which will leverage a BitVM bridge to potentially enhance Bitcoin's throughput from 7 transactions per second (TPS) to over 100 TPS. It would also bolster privacy.

If BitVM can indeed scale Bitcoin even to a fraction of the "billions of users" it anticipates onboarding, while simultaneously increasing the dominant blockchain's capacity 14-fold via the ambitious zkCoins project, the resulting demand would likely have a significant bullish impact on BTC's price.

To put this into perspective, as of June 2023, it is estimated that only 80-130 million individuals hold Bitcoin, according to bitcoin financial services firm River.

"I believe this is the most exciting application of BitVM bridges," Linus said. "Together with Blockstream Research, I am working on a concrete implementation. Our white paper will be released at the end of this month."

The significance of Linus's last statement cannot be overstated - most Bitcoin layer 2 solutions (with the exception of established platforms like Lightning and Blockstream's Liquid Network) are still in the conceptual stage and may never reach implementation.

Post-Halving Layer 2 Builder's Premium?

The jury is still out on whether Bitcoin will once again embark on a post-halving rally.

However, investors will have a clearer indication of its trajectory in mid-October, approximately 180 days after the halving.

And if Bitcoin does indeed replicate that trend, projects like Ordinals, Runes, and BitVM, which are committed to building novel functionalities upon the foundation of the oldest blockchain, could play a pivotal role in fueling that upward ascent.

Calicott aptly describes Bitcoin as "the asset for saving and...the network for building," adding that, "The technical components of the Bitcoin stack that are accelerating buildability are a force that will be reckoned with."