As the countdown to the Bitcoin (BTC) halving event ticks away, the anticipation within the Web3 community reaches a fever pitch. This pivotal moment, marked by its rarity and significant impact on the cryptocurrency market, has become the focal point for crypto investors around the globe.
The Bitcoin halving, a process hard-coded into the cryptocurrency’s blockchain protocol, occurs approximately every four years, and its approach is met with enthusiasm and speculative analysis from corners far and wide. The halving event reduces the reward for mining new blocks by half, a mechanism that inherently affects the supply of Bitcoin, potentially leading to significant shifts in its market value.
Despite its critical role in Bitcoin’s ecosystem, the halving event remains clouded with complexity and technical jargon, leaving many crypto enthusiasts and investors eager for clarity and insights. This post looks into the mechanics, implications, and historical impact of the Bitcoin halving and why it is heralded as the most anticipated event in crypto.
Bitcoin Network Operations
Bitcoin is a unique protocol that operates independently of a laid down financial system or government jurisdictions. The flagship cryptocurrency runs on a system of decentralized computer networks, which records all transactions in the coin’s ecosystem.
The system of complex interconnected networks in Bitcoin’s ecosystem is powered by an entity referred to as the coin’s blockchain, an open-source code that chains transaction histories, preventing unauthorized access aimed at theft and manipulation.
Bitcoin Halving Event Proper
The Bitcoin halving event could be described as an integral part of the coin’s existence, aimed at reducing the token’s supply and eliciting price increments. Miners eventually get to receive 50% of the original Bitcoin amount, usually disbursed as a reward for their efforts.
Meanwhile, mining is a process that Bitcoin and other top cryptocurrencies employ to sustain new coin production. Miners are responsible for validating a series of transactions known as blocks, which they add to the blockchain in exchange for rewards.
Notedly, miners earn rewards in the form of transaction charges and a specified amount of Bitcoin for correctly solving a problem on the blockchain; this mapped-out amount of Bitcoin for rewards is what the halving event tends to split by half with each show.
History Of Previous Halving Shows – How Has The Rewarding System Progress?
As an old-time tradition, the halving event occurs after the completion of about 210,000 blocks, which requires roughly four years; this explains why the show seems to happen once every four years.
The first splitting show happened in 2012, reducing the Bitcoin reward system from 50 to 25 Bitcoins. The second and third occurred in 2016 and 2020, respectively, reducing the amount of earned BTC tokens to 12.5 and 6.25, respectively.
Presently, another Bitcoin halving event is upon us, which implies that the reward system will drop from 6.25 to about 3.125 BTC. According to CoinMarketCap’s countdown, the 2024 halving show will happen in April, about 31 days from now.
Possible Impacts Of The Rewarding System On Miners
Going through how the reward system has progressed over the years, it is apparent that miners earned BTC tokens tend to reduce with each halving event.
Consequently, miners might lose interest as rewards keep dropping. However, it is worth noting that each halving event births a generalized rally that would see BTC attain significant price levels. The price increment could serve as a drive to keep the miners going.
Also, as mentioned earlier, miners receive transaction charges as rewards. These fees could skyrocket over the years to make up for the reductions.
How Does Bitcoin Halving Orchestrate A Wide Spread Rally?
The halving event always elicits a generalized market rally via two mechanisms. The first is by inducing scarcity, which invariably sets in increased demand.
The second is by controlling the inflation rate. These two factors were crucial in driving Bitcoin’s price surge over the years.
Being the world’s largest crypto asset, profits from trading BTC will eventually trickle into other crypto projects, from the leading altcoins down to lesser ones; this explains the narrative of the Bitcoin halving event eliciting a widespread market rally.
BTC’s Price Appreciation Following Previous Halving Events
During the heat of the halving show in November 2012, BTC was selling at approximately $12. Following the conclusion of the 2012 event, the coin skyrocketed to about $1,000 within a year.
Also, the halving event in July 2016 saw BTC ascend from $670 to about $19,700 in December 2017. Finally, the most recent Bitcoin splitting escapade elicited the rally that saw the coin attain a one-time all-time high (ATH) of about $69,000 between May 2020 and November 2021.
So What Do We Expect This Time Around?
As a rule of thumb, this year’s event remains a highly anticipated one for Bitcoin in its journey to attaining a six-digit market valuation.
Currently, the number one crypto asset is changing hands at approximately $62,193 after declining by about 5.8% in the past 24 hours. It is worth noting that the coin had hit a $73,737 ATH six days ago, which brings it close to hitting the $100,000 price mark.
While the current price cycle could probably be a correction or price retracement phase, chances still abound that BTC boasts strong potential to assume prices above $100,000.
