Bitcoin halving is a crucial event in the cryptocurrency’s history that reduces the number of Bitcoin in circulation by one half. In addition to reducing the inflation rate by the same amount, it also cuts the reward for mining Bitcoin in half. By reducing the supply of Bitcoins, it slows down the introduction of new ones into circulation. In what way does Bitcoin halving matter? When will Bitcoin’s next halving occur? In the event that Bitcoin halves again, what do cryptocurrency experts expect?
Bitcoin Halving: What Is It?
In order to understand Bitcoin halving, it is important to understand that miners receive Bitcoin in a Bitcoin wallet for each transaction they verify. With halving, miners receive half of what they would have received previously for each verified transaction. When Bitcoin was mined for the first time in 2009, miners received 50 BTC.
A pre-set schedule calls for halving every four years. It is estimated that this process will continue until roughly 2140, when all 21 million coins will have been mined. Since Satoshi Nakamoto mined the first million Bitcoins in 2009, 90% of Bitcoin’s total supply has been mined. The number of new Bitcoins created between now and 2140 will be less than 2 million.
Bitcoin Halving: A Brief History
It is easier to mine Bitcoin today than it was in 2009 if we examine the history of Bitcoin halving. Four years after Bitcoin was mined for the first time, the reward for mining dropped to just 25 BTC in 2012. Miners received just 12.5 BTC per coin in 2016. The rewards dropped to 6.25 BTC in 2020.
For a while, this scarcity makes BTC more valuable. However, the price of BTC does not exist in a vacuum, and it is affected by the overall economic climate, the stock market, consumer demand for BTC, and consumer confidence. If the market experiences a crypto winter prior to the next halving event, it will be interesting to see how it affects BTC prices.
Does Bitcoin benefit from halving?
Generally, the answer to the question, ”Is halving good for Bitcoin?” is a resounding “yes”. It may be harder for miners to acquire Bitcoin after a halving event, but this scarcity often makes their existing Bitcoins more valuable.
From its historic low just prior to the halving event, Bitcoin’s price rose by 40% and increased by 85% in 2020. As a result of the Coronavirus pandemic and an economic downturn, this event was clouded by economic fears. For statistical data in 2020, a footnote will always be required.
However, Bitcoin’s price also rose after the halving events in November 2012 and July 2016. There has historically been a brief sell-off after this deflationary event, which normally precedes the start of Bitcoin’s most dramatic bull runs. There was a 10,000% increase in BTC between 2012 and 2014. A roughly 2,500% increase occurred between mid-2016 and the end of 2017.
The story of Bitcoin’s halving and increase in value is more complicated than you think
Bitcoin’s value usually rises over time following a halving event, according to experts. Investors often sell off their BTC holdings as their BTC value rises to cash in on profits. Prior to a bull run, a halving event often triggers a sell-off, which drives prices down. In spite of other economic factors, this occurred in 2012 and 2016, as well as in 2020. According to some experts, halvings are already “priced in” to Bitcoin’s value, which means a halving event and a Bitcoin price increase may not be directly linked.
The founder of Binance, Changpeng Zhao, told Reuters reporters, “Historic events don’t necessarily indicate what will happen in the future.” Zhao had commented in 2020 that miners might be less willing to sell off their existing crypto investments because it will cost them almost double to produce Bitcoin. He noted that there is a psychological aspect to each halving event.
Bitcoin’s value, however, increased by 533% by May 2021. As a matter of fact, the most recent halving event exceeded investors’ wildest expectations. Over $68,000 was the all-time high for the crypto in November 2021.
What Will Happen when Bitcoin Halves in 2024?
Miners will receive just 3.125 BTC for every block mined after the next halving event in 2024. According to experts, 450 coins will be released every day after the May 2024 halving event if the daily average number of blocks mined remains constant.
Market Effects
The market value of Bitcoin tends to influence those of other cryptocurrencies as well. There is a good chance that this halving event will help end the crypto winter and kick off another bull run for all cryptocurrencies. Prior to the May 2020 halving event, the last crypto winter lasted until roughly December 2020.
As a result of people investing in crypto before the halving event, crypto’s bear run may have been ended. A halving event also prevented the cryptocurrency market from experiencing a bear market in Spring 2020, which was caused by the pandemic.
It depends on a variety of economic factors how Bitcoin, specifically, and the cryptocurrency market, in general, will react to the next halving event. Heider College of Business professor Robert Johnson told Forbes that “I don’t expect crypto to come roaring back as it did in 2021 because Federal Reserve monetary policy has actually become a headwind for the asset class.”
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