Are you wondering how Bitcoin halving affects users? If so, here are the possible implications of Bitcoin halving.
Maybe you’ve heard people talk about Bitcoin halving. Perhaps, you’re wondering how this event affects users. This article explains what you may want to know about Bitcoin halving and its implications.
Bitcoin is the most talked-about cryptocurrency in the global financial sector. Although some people and institutions associated it with the criminal world at first, this virtual currency gradually broke barriers and went mainstream. But most investors, traders, and users anticipate its halving process every four years. Some individuals and institutions invest in this virtual currency on platforms like Bitcoin Motion before the Bitcoin halving event, anticipating a price increase.
What is Bitcoin Halving?
Bitcoin halving reduces the cryptocurrency’s mining reward by half after miners mine every 210,000 blocks, limiting new coins’ supply and increasing the price if demand stays strong. Halving is a way of implementing fictitious price inflation until miners produce all the 21 million Bitcoins.
The occurrence is essential because it marks another drop in the rate of new Bitcoins as the cryptocurrency approaches its final supply. According to the Bitcoin protocol, halving will continue to reduce the reward for the miners by half until they produce all the possible coins by around 2140.
When is the Next Halving?
The mining process keeps getting harder. Initially, people could use home computers to mine Bitcoins. But increasing competition has made Bitcoin mining harder. Of all the possible 21million Bitcoins, miners have already produced 18.5 million, which equals 89%. As halving continues, Bitcoin supply growth will continue to decelerate.
The first Bitcoin halving happened on November 28, 2012, after miners had produced 10,500,000 bitcoins. The next one occurred on July 9, 2016, and the recent one on May 11, 2020.
The next Bitcoin halving will happen in early 2024, though there is no exact date. Users and crypto experts project that the miner’s reward will drop to 3 .125 BTC during the next halving.
Implications of Bitcoin Halving
Bitcoin is a scarce currency since its protocol limits the number of coins the world can have. Halving affects the Bitcoin supply, thereby restricting the number of coins in circulation.
Bitcoin halving considers that mining is the only process through which people and institutions access new coins. The halving process lowers the number of new digital coins that enter circulation. With increasing demand, Bitcoin halving makes this virtual currency a scarce asset. Here are the possible implications of Bitcoin halving for different players in the crypto industry.
- Investors: Bitcoin halving results in an increased price of this virtual currency because of the less supply and improved demand. These are positive news for investors because they expect the price of Bitcoin to rise after every halving. Regardless, the rate of price increase varies based on the logistics and situations of every price halving. Such platforms allow individuals and entrepreneurs to register and purchase Bitcoin with fiat money. Eventually, they can sell their coins at a higher price and make profits.
- Miners: Bitcoin halving reduces the number of coins miners receive as a reward for their effort. Consequently, this event can make Bitcoin mining less profitable if increasing demand and value for the cryptocurrency doesn’t accompany it. Therefore, a low reward can render it hard for particular miners or small mining institutions to survive in the Bitcoins ecosystem. That’s particularly so because they may not contend with larger mining organizations. When the BTC price increases, the multitude of miners can also increase.
Bitcoin halving can affect investors or traders, and miners depending on its impact on the demand and price of the cryptocurrency. Historically, the last three halving events have led to price surges. Therefore, many people and entrepreneurs rush to purchase Bitcoin at low prices in anticipation of a value increase after the halving event.