Satoshi Nakamoto, the person or organization whose identity is unknown to this day, invented the digital currency Bitcoin on January 3, 2009. It spawned a whole cryptocurrency industry, which has since grown immensely in popularity.
Bitcoin prices have risen and fallen dramatically in recent months. However, a Bitcoin “halving” event is on the horizon, and it might propel them to new highs this year.
What you'll learn 👉
What is Bitcoin halving?
Bitcoin halving is a technical event that occurs every four years, reducing the reward for mining new Bitcoin by half.
Halving was included in Bitcoin’s programming from the start to ensure scarcity and prevent inflation.
It’s good to note that previous halving events have corresponded with massive Bitcoin price gains.
You see, Bitcoin has a maximum supply of 21 million coins. This means that after exceeding the 21 million limit, no further coins will be minted or created. To counteract inflation, Nakamoto proposed halving the number of Bitcoin to limit its supply and increase its value.
This is why Bitcoin’s halving is important, as it inhibits its unregulated development.
Going down memory lane: Previous Bitcoin halving events
The Bitcoin network generates 210,000 new blocks every four years, as defined by its designers. The first award was 50 Bitcoin in 2009, when the price of Bitcoin was virtually zero.
The first Bitcoin halving took place on November 28, 2012, when the reward for mining a block was halved from 50 Bitcoin to 25. At the time, the price of Bitcoin was $12.
The second halving took place on July 9, 2016, when the price was cut from 25 Bitcoin to 12.5. The cryptocurrency’s price was then $658.
The third and most recent halving took place on May 11, 2020, when the Bitcoin reward was cut by half to 6.25 Bitcoin. At that moment, Bitcoin was worth $8,601.
Bitcoin’s second halving is likely to occur on or before April 19 2024, decreasing the mining reward to 3.125 bitcoin. The process will continue until approximately 2140.
This means that after the 2024 halving, 29 more halving events will take place before the final payment of one satoshi (the smallest unit of Bitcoin) is awarded.
Does halving increase price, and is it the right time to buy?
Bitcoin halving has previously increased the price of the cryptocurrency.
For example, during the first Bitcoin halving in 2012, the price was $12. It increased to $44 in 100 days, then $135 in 300 days.
Similarly, following the 2016 halving event, the flagship cryptocurrency increased from $658 to $1,551 in 300 days.
And in the most recent halving of 2020, the price rose from $8,601 to $50,941 in just 300 days.
According to CoinGecko, a cryptocurrency tracking website, Bitcoin’s price has risen by 103,877% since 2013. Bitcoin was selling over $70,000 in mid-April, only 4.4% off its all-time high set on March 14, 2024.
The forthcoming Bitcoin halving event and inflows into the spot Bitcoin ETF market have sparked investor interest, and many people in the crypto sector believe Bitcoin’s price might reach $100,000.
How to prepare for bitcoin halving and position yourself to take benefit from it
Price volatility often rises around the halving period, making it critical for crypto investors and fans to prepare accordingly.
One way to accomplish this is to stay informed about the scheduled halve date and its potential impact on the market.
The date is not fixed because each halving requires the mining of 210,000 blocks, so it’s the block creation rate that determines it. Keeping track of the most recent Bitcoin data and new content will help you stay on schedule.
Although historical data cannot always forecast future market movements, it can reveal prospective patterns and market mood, allowing you to make more informed investing decisions.
From the data above, the price of Bitcoin increases every time there is a halving event, so it’s wise to predict an increase in the price when the event happens.
You can take advantage of this by buying Bitcoin at a low price and selling it later when the price increases. Use the Bitcoin Decode Site for this.
As you buy the coin, remember that it’s critical to diversify your cryptocurrency portfolio among various cryptocurrencies or assets to reduce the risks connected with volatility during halving.
You also should set investing goals and methods depending on your risk tolerance before the halving event to ensure that you have clear entry and exit points that are not influenced by emotion.
Common misconceptions about Bitcoin halving
It is widely assumed that a Bitcoin halving will result in an immediate price increase. While historical evidence indicates that halving events sometimes precede bull markets, it doesn’t mean it will be the case this time.
Market dynamics and macroeconomic factors can potentially influence the Bitcoin price around the time of halving.
Another common myth is that halving has a direct impact on Bitcoin miners’ profits. While it reduces block rewards, miners’ profitability is affected by a number of factors, including network difficulty, operational costs, and transaction fees.
To remain profitable after the halving of their reward, miners must optimize their operations, such as improving their mining equipment or boosting their energy efficiency, in order to maximize computational resources and reduce costs.
While the block reward is cut, rising Bitcoin transaction volumes might boost the value of transaction fees miners get.
While there are concerns that halving will weaken the Bitcoin network’s security and stability, it is intended to alter Bitcoin mining difficulty in response to variations in the hash rate.
So, if miners leave the network because the decreased payouts make their operations unprofitable, the difficulty will drop dynamically, ensuring that the pace of block production remains consistent at roughly 10 minutes.
Parting shot
As Bitcoin approaches its maximum supply of 21 million coins, the impact of halving events is likely to increase. Whether you are an investor or trader, it’s important that you strategically position yourself so that you benefit from this event.
As mentioned, it’s wise to buy Bitcoin but don’t put all of your eggs in one basket. Diversify your portfolio to protect yourself from the volatility that is common during this time.
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