Halving is one of the fundamental processes in the Bitcoin ecosystem. Here’s what you should know about Bitcoin halving.
Bitcoin miners earn a standard amount of Bitcoins for validating transactions on the blockchain and mint new coins for circulation. During the first release, miners received 50 BTC per block, but today’s earnings have decreased to 6.25 BTC. Bitcoin’s creators programmed the payouts to reduce by half every four years or after miners have created 210,000 blocks until they attain the stipulated 21 million tokens. That process is known as Bitcoin halving. The next halving will occur in 2024.
Why is Bitcoin Halving Important?
Bitcoin halving is primarily a significant concern for miners since it represents a substantial drop in their returns. It is an in-built feature of the Bitcoin network, with a dramatic impact on every aspect of the crypto. Bitcoin traders should also be well aware of Bitcoin halving because it usually induces market turbulence. That would also impact several Bitcoin businesses and investments worldwide.
According to the BitIQ one leading crypto platform, Bitcoin trading volumes have historically surged immediately one month before and after every halving event. That is because halving reduces the supply of available Bitcoin, increasing the value of the yet-to-be-mined tokens. However, those fluctuations also create opportunities for profitability.
The first Bitcoin halving event took place in November 2012, when Bitcoin’s price was just about $12 per BTC. However, prices skyrocketed to a whopping $1,000 a year later. The second halving occurred in July 2016, when prices had fallen to $670 per token. However, it rapidly surged to $2,250 by July 2017 and peaked at an all-time high of about $19,700 just a few months later.
The most recent Bitcoin halving occurred in 2020 when its price stagnated at around $8,787. However, its value rose to all-time-highs in the following months, settling at about $48,000 per coin. Bitcoin set its record in February 2021, surpassing the $58,000 level.
Various factors might have played a significant role in Bitcoin’s post-halving booms, including the media’s increasing coverage of Bitcoin and crypto, a growing fascination with virtual assets, and increased real-world use cases. However, proof exists that halving is a unique catalyst for Bitcoin’s prices.
Many studies and experts are confident halving has a long-term positive impact on Bitcoin’s value. The standard theory’s bases are supply and demand economics. Bitcoin halving induces scarcity that automatically allows it to gain more weight. However, it takes some time to materialize.
The Next Bitcoin Halving
Many investors believe Bitcoin prices will definitely increase and may even attain better growth before the next halving event, scheduled for 2024. The assumption’s basis is Bitcoin’s track record and the results from its first and second halving events. Both events impacted significant surges in Bitcoin prices, as discussed above.
Halving relies on the number of blocks, and no precise date exists for when the next event will occur. However, the next halving will happen in 2024, cutting the miners’ rewards to 3.125 BTC. That would potentially impact significant instability and turmoil in the markets. Thus, miners, investors, traders, and other interested people in Bitcoin should start making preparations now.
It is easy for many people to say that we can expect the next Bitcoin halving to have the same effects as the previous ones discussed above. However, those are just speculations based on Bitcoin’s past performance. Bitcoin is a highly volatile currency whose price movements can be extremely challenging even for savvy investors and traders to predict with the utmost accuracy. Nevertheless, you should expect significant fluctuations in Bitcoin prices before and after the next halving event.