Halving is the most significant Bitcoin event that includes some sort of modification in the protocols of monetary policy. The next planned drop will be in April of 2024. So, let’s discuss some of the major purposes and impact of this specific event.
To understand the general concept, halving takes place every 4 years. When Bitcoin was initiated in 2009, the reward was 50 bitcoins for a block. Approximately every 4 years the sum for the reward was lessened, the final was announced in 2020 and is 6.25. Since the last change, the reward is the same.
According to the planned halving in 2024, the fixed sum per block will be 3.125. This event is somehow related to the time but technically depends on the code. The halving occurs every 210,000 blocks.
Understanding the Purpose of Halving in Bitcoin
Halving is an important feature of the Bitcoin policy. The major reason for the halving implementation is to higher the Bitcoin value in the long run. Also, it helps to control the inflation and scarcity of virtual currency.
Technically the halving is the creation of the circumstances of the decrease in supply. It is possible by the lessening of the bitcoins which are generated per block. By doing this, the currency supply rate is lessened so that inflation is at its slow pace.
The Bitcoin policy works in the same way as the main demand principle. It means that during the increased demand the price is rising.
Reduced Inflation: The Consequence of Bitcoin Halving
The halving, in the long run, will help to keep the general supply of BTC at 21 m coins. The major feature that differentiates Bitcoin from fiat money, is the fixed supply. The fixed limit of 21 m, cannot be changed or modified because of the decentralized approach to the Bitcoin functioning.
The digital crypto market and national currencies have totally different approaches. To begin with, standard money is fully centralized so there are no specific limits. A performative act is a good reason to change the limit. That provokes a really strong inflation rate for the population.
Centralized currencies can easily lose their value, because of the frequent inflations. In such a way the purchase power is reduced tremendously.
Anticipation and Excitement Surrounding the Upcoming Halving
When the period is closer to halving, investors are more active in their analysis of the market dynamics and trends.
There are several ideas which are discussed about the new halving event. Some strongly believe that prices will be high because of the supply reduction. However, other investors think that the prices have already reached their pick.
During the excitement period of the upcoming halving, it may be really obvious that trading activity will reach a high level of investor activeness. It may be a profitable time for some investors.
Reflecting on the Historic 2012 Bitcoin Halving
The first halving can be called a historical period already. It is characterized by the initial 50 percent lessening of the reward. After 50, there were 25 Bitcoins per block.
After November halving, Bitcoin started slowly rising and reached a certain pick only after 5 months. Then, there was also a small drop and rise. The biggest rise occurred after 8 months, and the price was $1,100.
Let’s practically explain how everything turned out after the first Bitcoin halving. For instance, at block – 21,000, there were created 3,600 BTC per day. The initial price before halving was $12.35 and a year later it grew to $964.
Predicting Bitcoin’s Post-Halving Price Trajectory
If taking into consideration the recent information about halving repetition. This event will most obviously continue to happen every 4 years. This event will continue to the point when the reward will reach zero value. According to the data, by 2024 almost 96.5 percent of Bitcoins have been mined. So closer to 2023, this number will be almost 99 percent.
It can be challenging to predict the range of future prices. Mainly because the interest rate of the future Bitcoin halving will be 5 percent.
The Impact of Halving on Bitcoin Miners: Challenges and Opportunities
The bitcoin market is moving to the tendency of increased mining difficulties, because of lots of factors and halving is one of them. Bitcoin halving will most likely influence the following factors and create a range of challenges:
- Hardware improvement. Because of the huge concurrency on the market and constant improvement of the produced hardware that is energy-effective, it is really important to consider this modification. So, with the implementation of the new hardware, it is possible to perform speedy calculations, and in such a way influence the overall hashrate growth.
- Growth of the Bitcoin popularity. Lots of businesses, small companies, and ordinary users started exploring the Bitcoin market. That’s why, the demand for security and mining has increased.
- Professionalism. During the recent couple of years, the mining industry has reached a high level of professionalism, and cannot be considered as a hobby anymore. To be successful, miners use specialized hardware and specific infrastructure. Large mining farms become a necessity.
- A search for cheaper energy. Mining is tightly connected to the location. That is because regions with lower prices for electricity are more popular among the miners. Countries where electricity is relatively cheap, are experiencing spicks in mining activity. By choosing the right regions, miners are increasing their profitability greatly.
Bitcoin halving will most likely increase competition and push miners to an additional investment into the equipment for higher profitability.
Those miners who will prioritize cost-effective methods, and choose the most suitable hardware, will definitely reach new opportunities with the next Bitcoin halving.
Examining Halving’s Influence on the Cryptocurrency Market
The halving event is creating a lot of predictions and discussions about the cryptocurrency market and future changes. Most investors predict that BTC decrease will most likely higher the demand.
When taking into consideration the previous experience of halving, the price was higher before the event and the next pick was not immediate. Usually, these picks are higher after a couple of months and sometimes even after the first year of the halving event.
At the same time, the cryptocurrency market is not fully connected only to halving. There are still lots of factors that influence the situation among such let’s determine the reaction of the investors.
Key Factors Shaping Bitcoin’s Price Post-Halving
There are some factors that positively and negatively impact the Bitcoin price post-halving. Here are some of the beneficial factors:
- Scarcity. Halving is a type of event that once again intensifies the scarcity of BTC. Before and after this even lots of users understand how limited the supply is. So that common users as well as professional investors will try to store this value in such a way the price will be higher. Also, halving could be helpful against inflation, because of the BTC value.
- Supply. Halving directly influences the creation of BTC and lessens the supply greatly. The fixed limit is only 21m. It means that lessening the supply will definitely create a sort of imbalance between the demand and supply rate. So, most likely the prices will increase.
- Market trends. Most of the investors consider that the price rate will increase. This may influence the tendencies and behavior of the users and Bitcoin investors greatly. Together with the speculative purchases, the situation may be changed to the price volatility for some time.
Among the negative factors that impact the price of Bitcoin, let’s stand out the following:
- Prices have already increased. There exists a point of view that the price is already increased on the Bitcoin market and there is no need to expect extreme picks after the halving. Halving is a regular event and that’s why all the interested users have already considered this factor. The reduced supply of BTC is not something new and investors are preparing for some outcomes before the halving itself.
- Impact of the miners. Bitcoin network and its security level are tightly connected with the miners’ activity. The halving lessens their rewards, and in case the price won’t rise high enough to cover this gap, then most likely lots of professional miners will leave the network. That may drastically influence the level of Bitcoin stability and security.