2024-02-24 18:37:52
Approximately every four years, a long-awaited event takes place on the Bitcoin network, which we call halving. In doing so, the cryptocurrency issuance rate is halved. When the blockchain launched in 2009, miners were rewarded with 50 BTC for each block mined. Currently, this amount is 6.25 BTC and will decrease to 3.125 BTC following the next halving.
The halving is exactly every 210,000. occurs following mining a block. On average, however, it can be said that these are four-year cycles. The most recent halving took place on May 11, 2020 at 630,000. block height. About 2,200 more blocks need to be mined before the next halving. This will take 56 days (from the publication of the article) with an average block time of 10 minutes. The big day can therefore take place sometime around April 20.
The halving is expected by all investors as the messiah, because according to the basic economic laws, a decrease in supply should lead to an increase in price. The pattern can really be observed on the bitcoin graph, at first glance the previous halvings may have contributed to the rise in the price of the cryptocurrency.
The next (and all subsequent) halvings will be a little different. Now it’s less than one and a half million bitcoins are waiting to be mined out of the maximum specified 21 million. Simply put, the April halving will technically have much less impact on the exchange rate than the last one.
The event’s relevance is further highlighted by the fact that bitcoin has now become a mature asset class with a large market capitalization. A month and a half ago, spot bitcoin ETFs also appeared in the United States. Some argue that the halving was never really as important as the community made it out to be, and that price increases in the past were fueled by other, less obvious factors.
Did everyone just blow the halving?
Bitcoin is issued in such a way that network maintainers are rewarded with brand new bitcoins when they successfully add a new block to the blockchain. What the miner does with the bitcoins he receives is up to him. As a rule, he turns it into money to cover the costs of mining, and this is how the coin enters the market circulation.
We currently have 93.5% of all mineable coins in this cycle, and by April 2028 we will be at 96.6% (including lost coins). This is an increase of only 3 percentage points compared to the current situation. The essence of the argument is that if demand continues to grow, it will naturally push prices up, which is certainly supported by slower output. However, when exactly the halving takes place will not play much of a role in the story.
There are also extreme opinions, according to which the halving is not only now, but in fact has never been a serious factor in the price of bitcoin.
The essence of this argument is that major increases and decreases in the price of bitcoin roughly coincide with halvings, but they also show a correlation with the global M2 money supply (exactly how, we wrote regarding in this article). This allows us to conclude that the supply side has always been so dwarfed by the demand that the halving of the supply every four years was of little consequence (while the demand continuously increased by several times).
It’s still important because of the myth
The other side of the coin, still based on the simple law of supply and demand, does not reject the positive role of halvings on the price. When you consider that spot ETFs are currently pumping roughly 9000 BTC out of the market per day, while the supply is 900 BTC per day, it will be a really noticeable change to suddenly be faced with a supply of 450 BTC per day.
ETFs currently need 10 times as many bitcoins as newly issued. As a result of the halving, suddenly 20 times less bitcoins will be created than would satisfy the needs of ETFs alone.
There is another argument in favor of the advocates of halving, which is perhaps the strongest: trading psychology. If you search for the word “halving” on the Internet, you will see dozens of graphs illustrating the price-inflating effect of the event. Recently, a serious myth has been built around the decline of the block reward. A very simple password known to everyone: the supply decreases, the exchange rate increases.
As in many other areas of life, there is an eternal truth: as long as enough people believe that something works, it will work.
1708825427
#halving #work #thought
