KUALA LUMPUR: Bitcoin will pose a significant impact on the cryptocurrency market after undergoing a "halving" on May 12, investment platform eToro said.
The halving, which takes place every four years, will see the production of bitcoin cut in half.
This means that mining the cryptocurrency only generates 50 per cent of the yield it used to, thus reducing the supply of bitcoin and preventing extreme price inflation.
eToro analyst Simon Peters said the halving event would not only affect the price of bitcoin, but it would also have a significant impact on the entire cryptocurrency market.
Peters said during and after the first halving in 2012, the key investors were those already involved in the asset class.
He said the bitcoin investor base was almost exclusively made up of those in the know; blockchain scientists and data programmers as well as libertarians interested in the idea of a monetary system outside of political influence and central bank control.
"Following the 2012 halving, bitcoin's price went from US$13 on the day to a peak of US$230 within six months.
"But it was the 2016 halving that arguably provided a watershed moment for bitcoin as it led to the 2017 to 2018 price rally, and subsequently brought the topic of crypto into public consciousness."
During the period, Peters said millennials had shown high interest in crypto assets as they represented 50 per cent of Malaysian crypto investors on eToro.
He added that after the second halving in 2016, bitcoin had exploded, both in terms of price and popularity due to the wide media coverage surrounding bitcoin.
He said there was a massive uptick in people investing in bitcoin on the eToro platform during the 2016 halving and he expects similar levels of investment again.
"In 2017 and 2018, 70 per cent of people came to eToro to invest in crypto.
"Since then, the crypto industry has matured, with talks of regulation, institutional investors entering the market and even central banks expressing an interest in the asset class."
Combine this with another price rally expected after the 2020 halving, and we could be on the precipice of crypto becoming a mainstay of investors' portfolios in the same way as stocks, bonds and commodities, he said.
"The price of bitcoin is currently around US$9,000 and if it starts heading towards the US$20,000 highs seen in the last rally, we expect even more people will want a slice of the action," Peters added.