Bitcoin halving is set to affect the investment choices of five in six UAE retail investors

eToro study suggests that potential to generate high returns (40 per cent) is the main driver behind the interest

Somshankar Bandyopadhyay

Published: Mon 22 Apr 2024, 9:44 PM

The Bitcoin halving is set to be a catalyst in the portfolio of UAE-based retail investors, with 78 per cent currently considering or planning to increase their investment in Bitcoin around the halving, a study showed.

Only five per cent said to be considering or planning to decrease their allocation, according to trading and investing platform eToro.

“Reflecting on historical data, we’ve observed that Bitcoin halving events have led to notable price increases, driven by the tightening of Bitcoin’s supply. For instance, the halvings in 2012 and 2016 both set the stage for substantial bull runs, and we saw a similar pattern following the 2020 halving. The year of the halving and the year following the halving since bitcoin’s inception have always been positive.” said Josh Gilbert, Market Analyst at eToro.

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“This four-year cycle and performance has not gone unnoticed by UAE-based retail investors, with a significant 78 per cent considering or planning to bolster their Bitcoin investments around the next halving. It’s clear that these events are viewed as bullish signals by many. Add to that the successful launch of the ETFs and the huge institutional interest they have garnered, it looks like another promising year for bitcoin. However, it’s crucial for investors to remember that past performance is not always indicative of future results and that broader market conditions also play a significant role in shaping prices.”

In the UAE, crypto assets have emerged as the predominant investment choice among retail investors, with 74 per cent currently holding investments in this asset class and another 63 per cent planning to expand their crypto holdings within the next three months.

The primary motivations driving this robust interest include the potential to generate high returns, identified by 40 per cent of investors, the belief in the transformative potential of crypto assets, which 36 per cent of investors agree on, and confidence in blockchain technology, trusted by 31 per cent of investors.

What is Bitcoin halving?

Scheduled for 19-20 April depending on the current rate at which bitcoins are created, the bitcoin halving is a key event occurring roughly every four years where the reward for mining new blocks is halved, decreasing the rate at which new bitcoins are created. This mechanism, integral to Bitcoin’s design, ensures a controlled, gradual issuance of coins until the maximum supply of 21 million is reached around 2140. Halving helps regulate Bitcoin’s supply, mimicking the scarcity of resources like gold and is critical to its monetary policy, potentially leading to possible price increases by reducing supply pressure.