General
The Bitcoin Halving is here!
Finally, the moment has arrived!
- Bitcoin will continue to undergo halvings until around the year 2140, when the reward for adding a new block will be zero and the supply will stop increasing. This halving will see the reward reduced from 6.25 to 3.125 bitcoins per block, meaning that the annual supply inflation rate will effectively drop from 1.70% to 0.84%.
- “The ‘halving’ can have favorable long-term effects on the entire ecosystem, with benefits extending to other assets and projects, stimulating the construction of infrastructure and product innovation.
- This 2024 halving holds promise, with speculations rife that Bitcoin could breach the $100,000 mark, while more bullish estimates envision its market capitalization soaring beyond $200,000.
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How does halving work?
- Bitcoin’s halving takes place when block rewards for miners on the Bitcoin blockchain are halved to reduce the number of new coins entering the network.
- The halving reduces the amount of new bitcoins generated per block, implying a lower supply of new bitcoins. In normal markets, a lower supply along with stable demand usually leads to higher prices.
- Bitcoin’s halving helps manage Bitcoin’s inflation rate by controlling the supply, fixed at 21 million bitcoins. This mechanism curtails the flow of new coins into circulation, ensuring scarcity and preventing devaluation.
- Every four years, the number of block rewards is halved. The day the quantity is halved is called the “halving”.
- Significant events, such as the U.S. presidential elections and, most importantly, the approval of Exchange Traded Funds (ETFs) by the U.S. Securities and Exchange Commission (SEC), are expected to bring institutional investment into BTC worth billions of dollars.
- Apart from the events mentioned, the increase in activity within Layer 2 and DeFi on the Bitcoin network also has an impact, driven by the popularity of the Ordinals protocol.
The Bitcoin Halving and the Bull Run
- Looking back at Bitcoin halving history, past occurrences have consistently triggered substantial price hikes and spurred broader cryptocurrency adoption.
- The first halving in 2012 saw Bitcoin soar to around $30, while the 2016 event propelled it to approximately $2,250. The most recent halving in May 2020 catalyzed a surge that culminated in a record high of nearly $29,000 by year-end.
- With halving, the ramifications go far beyond mere market sentiment: scarcity, market psychology, and mining dynamics all stand to be significantly influenced.
- Investors are recalibrating their strategies, whether through early acquisition, diversification, or deploying sophisticated analytical tools for more informed decision-making. Amidst the flurry of anticipation, a long-term investment horizon remains a steadfast approach for many, unfazed by short-term fluctuations.
The new and striking ATH of Bitcoin set the stage for the current Halving.
In mid-March, Bitcoin surpassed $73,000 as its all-time high. After a correction in the following weeks, it once again reached its ATH on April 8th.
- U.S-based Bitcoin exchange-traded funds (ETFs) recorded net inflows of USD 562 million on March 4, as the price of BTC surpassed USD 68,000, inching closer to its all-time high of approximately USD 69,000. This marked the third day with the largest inflows to Bitcoin ETFs since they began trading on January 11.
- Net inflows into Bitcoin ETFs were 10 times the amount of new BTC added to the supply through mining activities.
- As cryptocurrency enthusiasts and analysts eagerly track Bitcoin’s price trajectory, a surge in buying activity is anticipated as investors position themselves to capitalize on potential post-halving price spikes. Nevertheless, the divergence in expectations may spawn considerable volatility in the market dynamics.
Remember: we all hope that with the Bitcoin Halving the market will rise and improve, but don’t forget to trade safely and Do Your Own Research (DYOR).
Be prepared and test your strategies with the help of DEXTools.
Happy trading!
