Recently, investors and speculators in the cryptocurrency market seemed to focus on Merge ETH and the transition from PoW to PoS. This event is now behind us, and for the moment it does not seem to affect the ETH price particularly. Meanwhile, after a deep bear market, the topic of bitcoin halving may soon come to mind. This event may take place in April 2024.
Halving bitcoin
About once every 4 years, or more precisely every 210000 blocks, the issuance of new bitcoin is halved. This is due to the BTC algorithm, which was created in 2008, where every 4 years or so the reward to miners halves. The process should continue until there are no more than 21 million BTCs in the world, which could be around 2140. By now, more than 90 percent of the total supply of bitcoin is already on the market, while by 2030, at this rate of new coin creation, there could already be 98 percent of the total supply on the market. The halving phenomenon, in turn, is supposed to be responsible for controlling the deflationary nature of this cryptocurrency. With each successive halving, BTC becomes a rarer good and its inflation rate decreases. Today, bitcoin's inflation rate is 1.78 percent. After the next halving, in April 2024, this inflation rate will drop to 1.1 percent, etfstream calculates.
What has been the history of BTC halving?
As already mentioned, every 4 years or so, there is a processing of 210000 blocks, which halves the amount of reward miners receive. Bitcoin went public in January 2009. At that point, the incentive given to miners for supporting the blockchain and verifying the network was 50 BTC. The first halving of bitcoin took place when 210000 blocks were successfully mined, and this occurred on November 28, 2012. At that time, the reward dropped from 50 to 25 BTC. Another 210000 blocks were processed on July 9, 2016. The reward halved from 25 BTC to 12.5. In 2020, the reward was already only 6.25 BTC, and in 2024, according to the algorithm, it will be 3.125 BTC.
Source: Conotoxia MT5, BTC/USD, MN
Bear market vs. time after bitcoin halving
Why are we writing just now about an event that will not take place until April 2024? The reason may be the potential cycles of the BTC market, which has seen spectacular increases and massive corrections. Nevertheless, after the halving, the BTC price reached its bottom in a correction for about 29 months after the event. The last halving took place in May 2020. So now it is just 29 months since the reduction of the miners' reward, and the market seems to be in a strong correction. If history and the cycles of BTC were to repeat itself, it seems that the current fall could be significant for this market.
Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service)
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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