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Bitcoin briefly soared above $67,000 (€61,544) on Thursday morning, before once again settling around $61,544 in the afternoon. This was a considerable rebound following Wednesday’s dampened sentiment.

The rise was mainly due to the US Federal Reserve choosing to keep interest rates steady at their March FOMC meeting on Wednesday evening.

Explaining the decision, the US Fed said, in a statement: “Recent indicators suggest that economic activity has been expanding at a solid pace. Job gains have remained strong, and the unemployment rate has remained low. Inflation has eased over the past year, but remains elevated.

“The Committee seeks to achieve maximum employment and inflation at the rate of 2% over the longer run. The Committee judges that the risks to achieving its employment and inflation goals are moving into better balance. The economic outlook is uncertain, and the Committee remains highly attentive to inflation risks.”

The US Federal Reserve Chair Jerome Powell has also hinted that the central bank may cut interest rates some time this year, due to inflation’s strong fall. However, this will be decided on a meeting-by-meeting basis, based on economic data, such as labour market, retail sales, inflation and gross domestic product (GDP) numbers.

What’s behind the rise and rise of the Bitcoin?

Bitcoin has had an upbeat few months, seeing several fresh records in the past weeks. This has mainly been due to an increase in interest from several funds, such as Franklin Templeton and BlackRock, following the US’s legalising of bitcoin exchange-traded funds (EFTs) earlier this year.

A number of other major funds, such as Fidelity and Charles Schwab also offer Bitcoin ETFs now, which has led to increased speculation that a significant chunk of the rest of the market might follow suit as well.

This has led to increased investor optimism around Bitcoin, and cryptocurrency in general, also highlighted by a falling US dollar, showing more risk appetite in the market. Falling US inflation, as well as a still-resilient labour market has also fanned hopes that the US economy may be stronger than previously throught as well.

What could the Bitcoin halving mean for the cryptocurrency?

The fourth Bitcoin halving is due to happen sometime in April, when the number of Bitcoin blocks will reach about 740,000. This halving event is expected to cause block rewards to decrease from 6.25 to 3.125 Bitcoins, making the cryptocurrency considerably scarcer than it is now.

This follows the May 2020 halving, with the next one being expected sometime in 2028. However, the exact date of this April’s halving event is unknown, as it depends entirely on how long it takes to reach 740,000 blocks.

Bitcoin prices usually start rising a few weeks before a halving event, and continue to go up for about a year afterwards, as investors stock up on the cryptocurrency, anticipating higher demand and lower supply. As such, this rise could be what we are already seeing now.

However, although demand in the US still seems to be resilient this time around, much of the rest of the world is still dealing with increased cost of living, higher interest rates and geopolitical uncertainty. 

It therefore remains to be seen whether Bitcoin prices will still rise as much as in the past  following this halving event, as global investors outside of the US continue to remain fairly cautious.