2024-04-20 14:37:29
Prepare Bitcoin halvedAn important event which promotes cryptocurrency and strengthens its position as a rare commodity on global markets.
Friday witnessed the latest halving of the world’s most powerful cryptocurrency, a phenomenon that occurs every 210 blocks created (i.e. approximately every four years), bringing the reward of miners (those who mine Bitcoin) to halve, from 6.25 Bitcoins. at 3.125 Bitcoin per block.
The latest halving comes after Bitcoin hit an all-time high of $73.80,000 in March.
But what is Bitcoin halving?
Halving is a change in the blockchain technology underlying Bitcoin, designed to gradually reduce the rate of creation of new Bitcoins, until it stops completely when the level of 21 million Bitcoins is reached. Once this limit is reached, no more Bitcoin will be produced. cryptocurrency, which has generated billions in gains for investors around the world.
When drafting the codes for the cryptocurrency early in its launch, the original designer of Bitcoin – known under the pseudonym Satoshi Nakamoto – was keen to set a maximum limit on new issuances so that markets would not fall prey to inflation.
So far, around 19 million bitcoins have been issued.
The Bitcoin blockchain is designed such that a halving occurs every 210,000 blocks are added to the chain (approximately every four years), the amount of Bitcoin available as a reward to miners is halved, which makes mining less profitable and slows down. the production of coins.
Does the Halving Process Affect the Price of Bitcoin?
Some experts believe that Bitcoin’s scarcity gives it greater value, because every time the supply of a product decreases, its price increases due to increased demand. Others question this logic, pointing out that the problem has more to do with those. in charge. Cryptocurrency mining.
If miners sell their Bitcoin reserves, this will cause prices to fall, and they pointed out that it is difficult to give accurate predictions in this regard given that the sector is not transparent about the size of the stocks and supplies.
Since Bitcoin’s price hit record highs last month, it has recently fallen below $64,000, and JP Morgan analysts this week expected a further price decline after the halving.
Nikolaos Panigirtzoglou, an analyst at JP Morgan, said on Thursday that he expects the price of Bitcoin to fall in the short term after the halving, explaining that prices have already peaked as prices are still at their highest levels against gold. He also highlighted the weakness in financing investments in cryptocurrencies.
Analysts at Deutsche Bank take a similar view, as the bank’s cryptocurrency expert Marion Laborie said in a note on Thursday: “Markets have already priced in the halving of Bitcoin reward over the recent period, and we do not expect prices to increase. significantly after the halving.
What about previous halvings?
There is no evidence to suggest that the previous halvings were behind the subsequent rise in Bitcoin prices.
The most common reason for the rise this year is the U.S. Securities and Exchange Commission’s January approval of Bitcoin ETFs and expectations that central banks will cut interest rates.
While Ryan Rasmussen, Chief Cryptocurrency Research Analyst at Bitwise, expects Bitcoin price to see strong performance over the next 12 months and its price to range between $100,000 and $175,000, while some of the most optimistic scenarios expect the price to reach $400,000. .
When the last halving took place on May 11, 2020, the price increased by approximately 12% the following week and 659% over the following 12 months, but there were several explanations for this rise at the time , including accommodative monetary policy and increased liquidity. among investors at the time, and there is no confirmed evidence that the halving process was the direct cause of the rise.
The previous halving took place in July 2016, and Bitcoin rose about 1.3% in the week following the halving, before declining a few weeks later and then rising again.
Miners are expected to face a challenge: how to compensate for the decline in reward value while keeping operating costs low.
In its latest research report, Bitwise found that total miner revenues declined a month after each of the three previous halvings, but recovered significantly about a year later, thanks to significant increases in… Bitcoin Prices Additionally, major mining companies are expanding their operations.
Are other cryptocurrencies affected?
After the Bitcoin halving, the cryptocurrency market often experiences a period of extreme volatility and price fluctuation, and the following currencies may be affected by the halving process:
Bitcoin Cash
Bitcoin Cash was created in 2017, which is characterized by faster transaction speeds, and due to its history linked to Bitcoin, the price of Bitcoin Cash often fluctuates with the fluctuation in the price of the world’s largest cryptocurrency .
Ethereum
It is the second largest cryptocurrency by market capitalization, and it has features that the Bitcoin blockchain lacks. It is generally said that if Bitcoin is gold, then Ethereum is silver, and the price of the digital currency will most likely be affected. any fluctuations in Bitcoin prices.
Solana
Solana ranks among the top ten cryptocurrencies and often jumps when the price of Bitcoin rises.
dogequin
The cryptocurrency has enjoyed support from Tesla CEO Elon Musk and other celebrities for years, and the currency is trading at around $0.15, an increase of 58% over the last year.
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