“Unlocking the Future: Decoding the Mysteries of Bitcoin’s Halving — A Deep Dive into the Revolutionary Event Shaping the Cryptocurrency Landscape”
In the cryptocurrency world, people are eagerly awaiting the impending halving of Bitcoin. The “Bitcoin halving” also known as “The Halvening” is a significant development in the larger cryptocurrency space. Furthermore, it’s important to comprehend the significance of the halving event given the present momentum the digital currency is experiencing.
Bitcoin halving is when the reward for Bitcoin mining is cut in half and takes place every four years. It halves the rate at which fresh bitcoins are made available for use. To put it another way, it entails the Bitcoin network decreasing the quantity of new BTC tokens that are available for purchase. By doing this, it preserves the long-term value of Bitcoin.
In case you’re not familiar with Bitcoin, the network now adds 6.25 BTC tokens to the ecosystem every 10 minutes. When it first started in 2009, this amount was 50 Bitcoin. After then, it was halved again, first in 2012 to 25 BTC and then in 2016 to 12.5 BTC. This will be lowered once again in 2024 with the next Bitcoin halving, from 6.25 BTC to 3.125 BTC.
Why then is this relevant? It’s true that Bitcoin is finite in nature. Additionally, supply and demand influence its value, just like they do with any other tradeable asset. Crucially, this increases the scarcity of Bitcoin if fewer tokens are entering the circulating supply. If there continues to be demand for Bitcoin, this can and will increase its value.
With the bitcoin halving occurring, by gradually reducing the supply of new tokens, it ensures that Bitcoin avoids excessive inflation. A better option as compared to fiat due to excessive printing, which leads to Inflation.
How Does The Bitcoin Halving Work?
First and foremost, it is important to understand how new Bitcoin tokens are added to the circulating supply. Being a decentralized network, it means that transactions are not processed by intermediaries, like banks. Instead, transactions are verified by miners. They are added to the network in 10-minute block cycles. How you ask?
· Miners connect hardware to the Bitcoin network via specialist mining devices.
· Every 10 minutes, miners will attempt to verify a block of transactions.
· The mining device will aim to solve complex mathematical equations, generated randomly by the Bitcoin network.
· The first miner to successfully solve the equation will verify the respective block of transactions.
In doing so, miners receive newly minted Bitcoin. Currently, the mining reward stands at 6.25 BTC.
Every 210,000 blocks, the Bitcoin halving event takes place. Every ten minutes, as was previously mentioned, a new block is created. That equals 144 blocks every day. Therefore, 210,000 blocks are equivalent to around four years. The idea of halving Bitcoin is straightforward, despite the complexity of the underlying technology. There is a 50% reduction in the quantity of new Bitcoin that enters circulation every 210,000 blocks.
This will continue to be the case until 2140, when Bitcoin is expected to reach its maximum supply of 21 million BTC. Once this happens, there will be no new BTC.
Importance of the Bitcoin halving
1. Inflation Control
The fact that the Bitcoin halving event guarantees that inflation stays under control is perhaps most significant. In contrast to central bank policies, the basic programming of Bitcoin really allows us to estimate its supply with confidence. Once more, the amount of newly created Bitcoin will drop by 50% about every four years. This process will not alter since the Bitcoin code is immutable.
2. Scarcity
A major benefit of Bitcoin’s supply mechanism through the halving, is that it creates scarcity. For example, the fact that only 21 million tokens will ever exist means Bitcoin is a store of value. Just like gold, this means that the total amount of Bitcoin can never exceed its overall supply limits.
This is important from an investment perspective. As the supply of Bitcoin gets closer to its cap, its intrinsic value increases. This is because there is less Bitcoin being injected into the market. If demand for Bitcoin increases while its supply is limited, its value will appreciate. This is just the nature of market forces.
3. An Investment Vehicle
Based on historical data, there is a significant increase in the price of bitcoin both during and after the halving. Bitcoin was not intended to be an investment vehicle or a store of money. Rather, Bitcoin was developed as a medium of exchange that lets people do business without the need for middlemen. In reality, though, the great majority of consumers purchase Bitcoin as an investment vehicle. In light of this, a lot of investors find Bitcoin’s limited supply and inflationary restrictions appealing.
Bitcoin Halvings — A Complete Breakdown
History of Bitcoin Halving Events
It’s crucial to next examine how the markets have traditionally responded to past Bitcoin halvings. In the months that followed the halving incident as well as in the lead-up to it.
Based on the market forces of demand and supply, one would assume that the price of Bitcoin appreciates when the halving event occurs. But is this the case?
Let’s look at some examples. All these data are as per CoinMarketCap
May 11th 2020
Before: $6,600
During: $9,100. Bitcoin increased by 37%
After(The year closing): $29,000. An increase 0f 340% since April 2020
July 9th 2016
Before: $580
During: $662. Bitcoin increased by 14%
After: $959. An increase of 65%
November 28th 2012
Before: $10.70
During: $12.40. Bitcoin increased by 22%
After: $13.40. An increase of 31%
With these facts and figures given, it is possible to articulate that the price of Bitcoin rises during and most definitely after the halvening. With the oncoming halvening to happen in the next 71 days on approximately April 19th 2024 bitcoin maxis and plebs are definitely stacking up sats in preparation for this auspicious event. Don’t get left behind!!
Conclusion
Given that there is a limited number of 21 million tokens and that Bitcoin is a store of wealth, it meets all the criteria to be considered an investment vehicle.
In actuality, the great majority of purchasers of Bitcoin do so as investment products. Many investors find Bitcoin appealing due to its scarcity and inflationary constraints. The historical price motion of the cryptocurrency reflects investors’ keen focus towards the upcoming Bitcoin halving. Demand for Bitcoin has always increased as the halving event gets closer.
This is NFA and as always Do Your Own Research so as to get invested In Bitcoin as it is such a volatile asset that could loose you your hard earned money.
Peace out!!
