April 09, 2024: In less than ten days from now, Bitcoin halving event will be scheduled, even as the world around the $2.81 trillion valued cryptocurrency market waits with bated breath.
In theory, Bitcoin Halving is a programmed event scheduled at the completion of every 2,10,000 blocks, where the mining rewards on Bitcoin are reduced by 50%. The current reward per block for “miners” who validate each Bitcoin transaction through mining is 6.25 Bitcoins (BTC) which will reduce to 3.125 BTCs by April 20, 2024. It is through mining that new BTCs are generated and introduced into the market. the limit has been set at 21 million BTC since the inception of the world’s strongest cryptocurrency.
On the surface, the halving event seems to only concern miners who will now see a 50% reduction in their rewards for completing each block of validating BTC transactions. However, the fallout from the halving event is far-reaching as it can disrupt the cryptocurrency market, attract or repel investors, and skyrocket the value of new cryptocurrencies while pushing many others into oblivion.
In this article, we will explain the who, what, where, when, why and how of Bitcoin halving with its far-reaching impact on the cryptocurrency market.
Bitcoin Halving: The Economics of Supply and Demand
Bitcoin halving, as discussed earlier, is a programmed event scheduled every four years, where the block mining reward is reduced by 50%. Since the introduction of the ‘genesis’ block in the blockchain networks, the creators of Bitcoin cryptocurrency have set a limit of 21 million – the maximum BTC that can ever be generated by mining.
For further explanation we will use the example of gold and diamond mining. Both gold and diamond, naturally occurring substances, were discovered by prehistoric people and have been mined on a massive scale ever since, even to this date. However, over time, the mine owners began to control the supply of the precious items in order to maintain their “precious” and rare nature and therefore control the price, ensuring that the value always remains high.
Likewise, the creators of BTC and Blockchain technology (creators pseudonym Satoshi Nakamoto) launched the BTC network in 2009 with a genesis block, which carried a reward of 50 BTC for miners. As a decentralized system, the blockchain software is programmed with a limit of 21 million BTC that can ever be generated and after every four years the reward for mining is halved.
Through such programming, the creators have found a simple yet effective way to curb the supply and demand of BTCs, maintain their scarce value, and ensure that the bullish run of BTC continues to rise. It has been predicted by calculations that the halving events will continue until 2140 when the 21 million BTC limit will be reached.
Bitcoin Halving: A Whirlpool Event in the Crypto Market
The Cryptocurrency market has gained a reputation over the years for being extremely volatile. Past performance of a particular cryptocurrency does not determine its future and often even seasoned investors have had trouble making predictions. In this scenario, a halving event acts as a vortex where all digital assets are pulled in, and the entire cryptocurrency market is disrupted.
The first halving happened in 2012 when the reward for mining was reduced to 25 BTC.
Previous halving events of 2020 and 2016 led to a bullish run of BTC and attracted investors. Let’s see how BTC and the crypto market have fared in the past two halving events.
The most important change we can see after these events is the continuous increase in the value of Bitcoin. These price fluctuations always shake the community. It is also the main topic of discussion on major cryptocurrency exchange forums such as CryptoPie, Coinmarketcap, etc. Before we welcome the next Bitcoin halving, let’s review the impact of this event through various time periods.
Halfway through 2012
The first halving event took place on November 28, 2012 which reduced the reward for mining to 25 BTC from 50. The price of Bitcoin which was at $12.30 during the event rose to $1050 by November 2013.
Halfway through 2016
The second halving event that took place on July 9, 2016 reduced the mining reward to 12.5 BTC from 25. While this significantly reduced mining rewards, it also paved the way for more cost-effective mining setups that led to the creation of a pool of larger players in the mining industry. Bitcoin, which was trading at $650.96 before halving, hit an all-time high of $20,089 after 526 days of the July 9 event.
Halfway through 2020
The third halving event took place on May 11, 2020, amid a raging coronavirus pandemic. The halving event came in the wake of the Bitcoin price crashing from $7935 to $4826 in a single day on March 12, 2020. The halving resulted in a reduction of block reward to 6.25 BTC. Bitcoin traded at $8,787 during the halving and nearly one and a half years later it peaked at $69,000.
Halve 2024
The fourth halving event is scheduled around April 20 when the total number of blocks will reach 7,40,000. The reward for mining will be reduced again by 50% to 3,125 BTC.
Is Bitcoin Halving Good?
Experts suggest that historically, halvings have always led to a surge in the value of BTC and the rise of other cryptocurrencies. Since the value of BTC lies in its limited supply, the halving events will only see the market go positive.
The miners, on the other hand, will have to look for resource optimization and to increase their hash power as we are expected to see greater consolidation of miners in the coming times.
Also Read: Significance of Upcoming Bitcoin Halving for Indian Investors
Disclaimer for Uncirculars, with a Touch of Personality:
While we love diving into the exciting world of crypto here at Uncirculars, remember that this post, and all our content, is purely for your information and exploration. Think of it as your crypto compass, pointing you in the right direction to do your own research and make informed decisions.
No legal, tax, investment, or financial advice should be inferred from these pixels. We’re not fortune tellers or stockbrokers, just passionate crypto enthusiasts sharing our knowledge.
And just like that rollercoaster ride in your favorite DeFi protocol, past performance isn’t a guarantee of future thrills. The value of crypto assets can be as unpredictable as a moon landing, so buckle up and do your due diligence before taking the plunge.
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