Today, let’s dive into one of the most significant events in the world of cryptocurrency: the Bitcoin (BTC) halving. The Bitcoin halving just occurred over the weekend without any issue. Investors had been waiting months for the event, so how will this affect the crypto market moving forward?
If you’re new to the crypto scene or just need a refresher, this edition of our newsletter will help you understand what the halving is all about and why it’s a big deal.
What Is The Bitcoin Halving?
Satoshi Nakamoto, the creator of Bitcoin, designed Bitcoin to have a fixed supply of 21 million coins. He also programmed Bitcoin to issue new coins at a fixed, decreasing rate, until the year 2140. That means every four years or every 210,000 blocks, Bitcoin’s code triggers the halving event. This event halves miners’ rewards, otherwise known as the issuance rate, reducing new bitcoins created by 50%.
Why Is It Important?
The halving is important because it directly impacts the supply of new Bitcoins entering the market. With the reduced rate of issuance, the supply of Bitcoins grows at a slower pace, leading to increased scarcity over time. Bitcoin’s scarcity is often cited as one of the key reasons for its potential to store value over the long term. After all, with dollar inflation at elevated levels, it isn’t hard to understand the value of a fixed supply of a currency.
No matter what you or I do we could never change the fact that there will only ever be 21 million Bitcoin. That also goes for governments or central banks, because they hold no power over Bitcoin’s issuance. That means they can’t tamper with Bitcoin the way they have diminished the value of the dollar or other foreign currencies.
Why Is This Halving Special?
This particular halving is special for several reasons. Firstly, it marks the fourth halving event in Bitcoin’s history, highlighting the ongoing maturation of the network. Secondly, it comes at a time when institutional interest in Bitcoin is at an all-time high, with major players like Tesla (NSDQ: TSLA), MicroStrategy (NSDQ: MSTR), and Block (NYSE: SQ), which was formerly known as Square, adding Bitcoin to their balance sheets.
Additionally, the recent approval of spot Bitcoin exchange-traded funds (ETFs) in several jurisdictions has opened the floodgates for institutional and retail investors alike, generating a significant influx of capital into the market. There have been steady daily inflows into these ETFs, which has translated into an increase in demand.
However, most importantly, this is the first cycle where Bitcoin has hit a new all-time high before the halving. Typically, BTC doesn’t register a new record high until several months after the halving. This time around, BTC blasted through its previous peak of $69,000 more than two months before the halving. All eyes are on Bitcoin to see how high it might go in the months ahead.
What To Expect Moving Forward
Historically, Bitcoin’s price has experienced significant rallies in the months following each halving event. This pattern is attributed to a combination of factors, including the reduced supply of new Bitcoins entering the market and increased investor confidence in Bitcoin’s long-term value proposition. While past performance is not indicative of future results, many analysts and investors are closely watching to see if history will repeat itself in this cycle.
The biggest gains of the crypto bull market are almost always made in the months that follow the Bitcoin halving. Combine that with the fact that the market has entered a correction over this past month, and you can see why there is opportunity. For the savvy investor. it is apparent that plenty of trade and investment opportunities will emerge.
Potential Supply Shock
One of the key implications of the halving combined with the influx of capital from Bitcoin ETFs is the potential for a supply shock in the market. With the issuance rate of new Bitcoins cut in half and more investors seeking to acquire and hold Bitcoin, the supply-demand dynamics could tilt heavily in favor of buyers. This imbalance could lead to increased upward pressure on prices as buyers compete for a limited supply of Bitcoins.
In conclusion, the Bitcoin halving is a significant event that has far-reaching implications for the crypto market. The 2024 halving has just passed on April 20, and we are now evaluating its effects on the crypto market. If this time is anything like the last few halvings, we can expect prices to increase dramatically in the months to come.
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