The Halving is Coming! What is Bitcoin Halving and How It WorksMar 21, 2023
As Bitcoin halving is looming on the horizon, crypto enthusiasts get even more ecstatic expecting the major event of the industry. We come as excited and eager to prepare our users for what’s to come!
The concept of halving is paramount to understanding the price movements behind Bitcoin and Ethereum, as well as of cryptocurrency market as a whole. This blog post will provide an overview of what Bitcoin halving is, when to expect it, and how much of an impact it has on the overall crypto market to help inform new users of cryptocurrency and shed light on this key event for those already invested.
What is BTC Halving?
Bitcoin halving is an important event that takes place periodically and keeps the cryptocurrency in check. It is a pre-programmed process occurring with every 210,000 blocks added to the BTC chain, which takes about four years.
Halving aims at reducing Bitcoin miner rewards by half and ultimately slowing down the production of new coins in order to counter inflation. The decreased supply could potentially drive up demand and increase Bitcoin’s overall value. The process will continue before all 21 million Bitcoins are minted, which is estimated to happen circa 2140.
Historical Significance of the Bitcoin Halving
By the 14th anniversary of Bitcoin, we experienced three halvings that occurred in 2012, 2016, and 2020. The event has an immense amount of historical significance due to its implications for the Bitcoin economy and ripple effect on Ethereum, the whole altcoins market, and NFTs.
On May 11, 2020, Bitcoin’s third and most recent halving event happened when miner rewards got reduced from 12.5 Bitcoins per block to 6.25 BTC. The milestone was followed by a massive bull rally, with the coin reaching its all-time high at $68,789 in November 2021.
The Effect of Halving on BTC Price
Previous events point towards an increase in volatility before and shortly after halving as investors adjust their holdings accordingly.
The cryptocurrency market is pretty much cyclical and follows a very similar pattern, as proven by historical records. Typically, what happens to Bitcoin around halving cycles is a steady uptrend towards the estimated date and new all-time highs 6 to 18 months after halving.
The reasoning behind this is that reduced rewards have a positive impact on the price since less supply generally leads to higher prices. As the amount gets scarce, the prices soar and then lean towards correction with the bear market stepping in — the formula hasn’t changed since the Bitcoin inception.
|Source: @Decentrader via Twitter
Bitcoin Halving: Impact on Mining
Bitcoin mining difficulty has been increasing significantly for the past few years due to rising expenses on hardware and electricity. A scheduled decrease in rewards may put more pressure on miners, demanding more effort from their side to secure steady returns. However, the massive BTC value growth would compensate for diminishing returns even when earnings are cut in half.
Ultimately, with each halving event, we could expect major changes to how miners approach the system to an extent where new technology emerges to make the enterprise less demanding and more enticing to miners.
When the Next Bitcoin Halving
We’re currently one year apart from the next Bitcoin halving, which is expected in March or April 2024. The event will halve the reward given to miners for verifying transactions to 3.125 BTC.
Analysts and traders are speculating about where the BTC price will be as we approach the end of a four-year cycle. Some say it could lead to an increase of 50% and more by year's end, considering the pattern persists. Others are careful with predictions due to the inevitable reduction in incentives for miners.
|Source: @TATrader_Alan via Twitter
What to Expect Prior to Next Halving
This event marks a monumental occasion in the cryptocurrency world as it historically leads to an increase in Bitcoin value. Predicting the extent of this increase is still up for debate. By far, the king of crypto seems to be at a good start of halving prepping as the price per coin shows a strong recovery from $19k to above $27k by the time of writing.
This presents both opportunities and risks, making it a worthwhile endeavor for those invested in digital currency. As such, it is important to closely follow news and developments around this event to make informed decisions when investing in Bitcoin.
The Cryptocurrency Future is Unpredictable, but At Least One Thing is Certain
Halving is something observers of the Bitcoin market will have their eyes on before and after 2024. Overall, this fascinating development will likely shape Bitcoin markets for many years and could potentially steer cryptocurrency adoption in a new direction.
Regardless of what happens, one thing remains certain: Bitcoin halvings play a crucial role in blockchain technology and should not be ignored or underestimated in terms of its power and potential effects on digital asset markets.