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The Bitcoin Halving Explained: Why It Matters For Investors

What is Bitcoin Halving

Whether it’s effective over the long run remains to be seen. In contrast, crypto advocates believe bitcoin is a currency that will maintain or grow its value over time, meaning anyone can buy and hold without fear of inflation. Remember that Bitcoin runs on a blockchain, which is like a giant spreadsheet that keeps track of every transaction, as well as who owns how many bitcoin. This spreadsheet is updated by millions of independent miners around the world, who carry out the task using computers.

What is Bitcoin Halving

One way the Bitcoin network hopes to achieve this is through its hard cap of 21 million bitcoin, meaning there will only ever be 21 million bitcoin in existence. Unlike the central bank model that fiat currencies are subject to, where an unlimited amount of new money can be injected into or withdrawn from the system, bitcoin’s absolute supply is limited. Bitcoin halving is a much-hyped event that has been happening at approximately four-year intervals, with the first one occurring in 2012.

Why does Bitcoin halving occur?

In the past month, bitcoin has surged 32% as the SEC appears closer to approving the first bitcoin spot ETF in the US. Investing giants such as BlackRock and Fidelity are leading the efforts What is Bitcoin Halving to establish such funds. Get this delivered to your inbox, and more info about our products and services. “This is nuclear winter for everybody who doubted ethereum,” Thielen wrote.

The model measures Bitcoin’s current supply (stock) against its annual new issuance (flow) to quantify its scarcity. A higher ratio indicates greater scarcity, which PlanB’s model correlates to a higher value. It is commonly https://www.tokenexus.com/ viewed that injecting new money supply into circulation can cause inflation. Bitcoin hopes to avoid this through the halving, which allows it to reduce the amount of new supply that is released as time goes on.

When is the 2024 Bitcoin Halving?

However, the model has limitations and should be used alongside other analyses. Demand, adoption, regulations, and external events can all impact Bitcoin’s real-world price independently from stock-to-flow dynamics. The S2F model gained popularity for largely accurately predicting Bitcoin’s historical price trajectory based on scarcity. Investors use S2F charts showing the relationship between Bitcoin’s stock-to-flow ratio and price to identify investment opportunities. Halvings are highly significant because they reduce the rate at which new Bitcoin enters circulation by 50% each time.

  • It is difficult to predict how the halving will impact its value.
  • Because the Bitcoin Halving process is baked into the protocol to happen at regular intervals, every 210,000 blocks, we can use this information to determine when the next Bitcoin Halving event will occur.
  • Halving role in controlling the supply of new Bitcoins is one of the reasons the world’s most popular cryptocurrency is seen as a store of value that’s more akin to gold than a fiat currency.
  • Exactly 2 months after the World Health Organization (WHO) declared COVID-19 a Pandemic, the Bitcoin code, unperturbed by the real-world situation, executed the last Bitcoin halving, its third in total.
  • Bitcoin hopes to avoid this through the halving, which allows it to reduce the amount of new supply that is released as time goes on.
  • At the first Halving, the 50 BTC mining reward was halved to 25 BTC.
  • Learn about the four phases of the Bitcoin and crypto market cycle in this article.

At the first Halving, the 50 BTC mining reward was halved to 25 BTC. In the next 2 Halving events, 2016 and 2020, it was cut to 12.5 BTC and then 6.25 BTC. In the next Halving, April/May 2024, Bitcoin mining rewards will be cut to 3.125 BTC.

The Broader Perspective: A Sustainable Model

They prove that the system continues to work even after Nakamoto’s disappearance and can keep its monetary promises by automating some processes. On the other hand, while the halving reduces the reward for miners, it equally lowers the supply of new coins without reducing the demand, notes Patricia Trompeter, CEO of cryptocurrency miner Sphere 3D Corp. At that point, there will be 21 million BTC in circulation and no more coins will be created.

What is Bitcoin Halving