Bitcoin has always been synonymous with volatility. Its value has experienced drastic rises and falls, making it a subject of both interest and concern for investors worldwide. However, the recent Bitcoin halving event has introduced new uncertainty into the market, leaving traders and enthusiasts speculating about its next move.
Bitcoin Halving Explained
Bitcoin halving is a significant event that occurs approximately every four years, where the reward for mining new blocks is halved, meaning miners receive 50% fewer Bitcoins for verifying transactions. This mechanism is part of Bitcoin’s design to introduce new Bitcoins into circulation at a controlled, decelerating rate, ultimately capping the supply at 21 million coins. Halvings tend to have a profound impact on Bitcoin’s price due to the reduced rate at which new coins enter the market, potentially leading to higher prices if demand remains strong.
According to Investopedia, the Bitcoin halving is when Bitcoin’s mining reward is split in half. It takes the blockchain network about four years to open 210,000 more blocks, a standard set by the blockchain’s creators to continuously reduce the rate at which the cryptocurrency is introduced.
The first reward was 50 bitcoin. Previous halving dates were:
- November 28, 2012, to 25 bitcoins
- July 9, 2016, to 12.5 bitcoins
- May 11, 2020, to 6.25 bitcoins
- April 19, 2024, to 3.125 bitcoins
The next halving is expected to occur in 2028 when the block reward will fall to 1.625 BTC. As of April 2024, about 19.69 million Bitcoins were in circulation, leaving just around 1.31 million to be released via mining rewards.
Bitcoin Halving Effects
Inflation
One of the key concepts behind halving the reward is to address inflation concerns. Inflation is a decrease in the amount of goods a certain amount of currency can buy at any given moment. In the U.S., inflation is measured by how much it costs to buy a basket of goods. There is an acceptable inflation rate that is considered good for an economy—usually 2%—but this number is generally a target set by central banks as a goal rather than a reachable figure.
The Bitcoin halving is intended to counter any inflationary effects on Bitcoin by lowering the reward amount and maintaining scarcity. However, this inflation “protection” mechanism does not protect Bitcoin users from the inflationary effects of the fiat currency to which it must be converted to be used in an economy. Gains made regarding market value might offer inflation protection for investors, but it doesn’t for the cryptocurrency's intended use as a payment method.
Investing
Bitcoin wasn’t intended to be an investment. It was introduced as a payment method that attempted to remove the need to have regulatory agencies or third parties involved in transactions. It became popular with investors once it was noted that there was the potential for gains. Investors poured into the new asset space, creating demand that the cryptocurrency’s designers may not have anticipated. For investors, a halving represents a reduction in the new coin supply, but it also offers the promise of an increase in investment value if the event’s effects remain the same. But this places Bitcoin investing into the realm of speculation because those invested in the cryptocurrency are hoping for gains.
Mining
Miners are the people, groups, or businesses that focus on mining for profitability. When new Bitcoins are awarded, the miners who receive the reward have been making substantial gains in the past. As Bitcoin’s price fluctuated over the years, it remained a lucrative endeavor—if it hadn’t, the large mining businesses wouldn't have continued operating. However, a halving cuts mining rewards, so the endeavor becomes less profitable with each halving if prices remain the same or drop. The large-scale mining facilities needed to remain competitive require enormous amounts of money and energy. The equipment and facilities need maintenance and people to conduct it. They also need to upgrade their mining capacity to maintain their position in the industry.
What Happens When Bitcoin Halves?
The term “halving” as it relates to Bitcoin concerns how many tokens are rewarded. This acts as a way to simulate diminishing returns, theoretically intended to raise demand.
Why Are the Halvings Occurring Less Than Every 4 Years?
The Bitcoin mining algorithm is set with a target of finding new blocks once every 10 minutes.7 Some blocks take more than 10 minutes; some take less. This can decrease or increase the amount of time it takes to reach the next halving goal. For example, if blocks consecutively average 9.66 minutes to mine, it would take about 1,409 days to mine the 210,000 blocks required (four years is 1461 days, including one day for a leap year).
What Happens When There Are No More Bitcoins Left?
It is often thought that in 2140, the last Bitcoin will be mined. However, if the reward is halved every 210,000 blocks, it will get smaller and smaller until one satoshi is the reward and the total amount circulating equals 21 million. One satoshi is 0.00000001 Bitcoin—it is the lowest denomination of Bitcoin and cannot be halved.
Bitcoin Price Prediction: How High Will Bitcoin Reach?
According to Coinpedia, several prominent figures in the crypto space have weighed in with their predictions for Bitcoin’s post-halving trajectory. Notable names such as Thomas Lee of Fundstrat, Mark Yusko of Morgan Creek Capital Management, and financial institutions like Standard Chartered and Bernstein have all projected substantial price gains for Bitcoin. Predictions range from Bitcoin reaching $150,000 by year-end to hitting $200,000 in the current bull cycle. Even renowned financial author Robert Kiyosaki and Galaxy Digital CEO Michael Novogratz have expressed confidence in Bitcoin’s potential, with price targets of $100,000 and beyond.
Bitcoin (BTC) Price
At the time of writing, Bitcoin (BTC) is trading at $66,289 with an increase of 1.8%. The trading volume is $23,495,280,299 in the last 24 hours, representing an increase from one day ago and signaling a recent rise in market activity and the market capitalization is $1,305,128,528,342.
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Source: CoinGecko
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