There is a constant influx of new cryptocurrencies entering the market each year, but Bitcoin remains the dominant force. The success of this can be attributed to various factors, such as its widespread recognition, pioneering status, and, of course, its carefully crafted economic principles.
At the heart of this design lies Bitcoin mining, a process that enables miners to earn rewards for verifying transactions. However, Bitcoin stands out from other assets due to its limited supply. Periodically, the mining reward is halved in an event called “halving.”
I have personally witnessed the significant impact that halvings can have on the crypto industry, affecting the price of Bitcoin and the overall market sentiment. In this article, you’ll explore the concept of Bitcoin halvings, their purpose, and their potential impact on the rest of the crypto industry.
The Bitcoin Halving in 2024 is just around the corner! IT IS HAPPENING ON April 20th, 2024.
What is BTC halving?
The Bitcoin halving is a scheduled occurrence that takes place roughly every 4 years or after the mining process of every 210,000 blocks. During a halving event, the reward for mining a new block of BTC undergoes a significant reduction.
Upcoming Bitcoin Having
The upcoming Bitcoin halving is projected to occur on April 20th, 2024, which is just 38 days from now.
Bitcoin miners who successfully confirm transactions are currently rewarded with 6.25 new BTC for each mined block. The halving will decrease the block reward to 3.125 BTC.
This date is subject to constant updates as new blocks are added. Please note:
- The Bitcoin halving is a significant event that reduces the Bitcoin mining reward by half.
- The rate at which Bitcoin decreases is cut in half every 4 years.
- The most recent Bitcoin halving took place in 2020.
What exactly happens during a Bitcoin Halving ?
When the value of bitcoin is divided in half:
- The block rewards that miners get for participating in the network and generating new transactions have been cut in half.
- This causes the overall inflation rate of Bitcoin to fall since miners receive fewer BTC every block as a reward for mining.
- No, transaction fees will not be cut in half. Even if the rewards for mining blocks are decreasing, they still offer miners a reason to keep the network secure.
- When this happens, the cryptocurrency market usually responds by talking more about Bitcoin’s potential future worth and function in the financial system.
Why does BTC halving occur?
A good questions for most curious BTC fanatics. Better news is that we have an asnwer.
Incorporating halvings into Bitcoin’s design serves multiple purposes:
Supply is controlled
The maximum quantity of Bitcoin coins is 21,00,000, in contrast to fiat currencies that central banks can print to their hearts’ content. Over time, Bitcoin becomes a deflationary asset due to the halving mechanism that ensures its progressive introduction into the economy.
Reduced Inflation
Decreases in the quantity of Bitcoin have the effect of reducing its inflation rate. This stands in sharp contrast to more conventional fiat currencies, the inflation of which can be affected by things like government policy and economic trends.
Environmental friendliness
The 21 million Bitcoins will not be mined too soon thanks to the halves process, which will allow the Bitcoin network more time to develop, mature, and gain widespread adoption.
Miner Incentive. The expectation is that miners will still be incentivized to keep the network secure and intact by the rising value of Bitcoin and transaction fees, even while block rewards are decreasing.
For miners, what does the halving mean?
The mining and cash expenditures will skyrocket after the April 2024 Bitcoin halving since the block rewards will be cut in half. According to CoinShares’ most recent analysis, the cost to mine one Bitcoin is expected to increase from $16,800 to $27,900, while the cost to buy one Bitcoin would grow from $25,000 to $37,800. It is anticipated that the average cost will be around $37,856 after halving.
Although Riot, TeraWulf, and CleanSpark are prepared for the shift, CoinShares notes that if the price of Bitcoin drops below $40,000, it could be difficult for all miners to make a profit. Energy prices increased, the research shows, from 68% to 71% of overall expenditures, despite more efficient mining technology.
Expectedly, miners’ profit margins will be squeezed by the halving, and only the most efficient will be able to survive. There will be a complicated effect on Bitcoin values, according to CoinShares, because of the halving, a decrease in mining difficulty, and potential miner exodus.
High prices may decrease miner profitability and lead to selling pressure, according to the article. On the other hand, the halving might have a favorable impact on Bitcoin’s value. After the Bitcoin halving, they don’t estimate its price at all. This shows that post-halve pricing are very unpredictable, but one thing is certain: there will be a lot of market excitement surrounding the halving event.
Is the upcoming halving going to cause Bitcoin’s price to go up?
Even while we can learn from the past, it doesn’t mean we have to follow it. They do, however, prove that the halving mechanism was crucial to Bitcoin’s architecture. Prior to this halving, Bitcoin’s price went through a period of substantial growth.
There are a lot of things that affect Bitcoin’s price, though. Things like market demand, global economic conditions, legislative developments, and technology improvements are just a few of them.
Even while miners are less likely to sell Bitcoins as the mining payment drops (since they have less to sell), this is by no means a guarantee. While the price changes after the halving can be used as a benchmark, they are not indicative of future performance.
While it’s instructive to look at patterns after past BTC halvings for context, going forward, it’s important to know how Bitcoin fits into the bigger picture and how many different things can affect its value.
For now, the price of one BTC has risen dramatically and have skyroketed up to $70,000. Thanks you for reading,; keep visiting!