There is one every four years Bitcoin halving place. This event halves the reward for Bitcoin miners and permanently tightens the inflow of new Bitcoins to the markets. Historically, the halving led to serious price shocks in the long run. The next halving will take place next year.
Why this matters: Hate it or love it, cryptocurrency Bitcoin remains one of the best performing assets of the 21st century. Bitcoin was born out of the financial crisis of 2008 as an invention of the anonymous computer scientist Satoshi Nakamoto. Bitcoin would serve to eliminate third party banks and other institutions in payments and return control of money and value to the individual. At the end of last year, a Bitcoin was still worth almost 69,000 euros. Today, the price of the crypto coin remains around 24,000 euros. Still an impressive run for the 14-year-old asset.
One of the most amazing features of the self-regulating Bitcoin system is its ability to actively counteract inflation. Bitcoin has a built-in scarcity. For example, the total possible stock is fixed at 21 million units. Miners have already been able to mine more than 19 million. So it sounds like Bitcoin will be completely mined within a few years. Nothing is less true.
The Bitcoin system’s algorithm ensures that the new Bitcoins that miners get for their activities are regularly capped. The phenomenon manifests itself every time 210,000 blocks (blocks with transactions that verify miners) are added to the blockchain. The increase in the hashrate (amount of energy that miners pump into the system) is adjusted approximately every four years. Thanks to this inflation-pressing system, the last Bitcoin will only be mined around the year 2140.
The previous halving took place on May 11, 2020. Currently shadow experts that the next one could happen on May 16, 2024. The reward for miners will drop from 6.25 Bitcoins to 3.125 Bitcoins from that point on. Or from 134,493 to 67,246 euros.
In any case, most Bitcoiners expect the next halving to take place between February and June 2024. Those same Bitcoiners are excited, because Bitcoin is currently relatively cheap, and has a habit of seeing a serious upward price shock a few months after a halving. Anyone who believes this thesis to be correct is buying Bitcoins en masse to profit from these market movements.
Don’t throw away your savings, but definitely buy some Bitcoin
There are some reservations about the consequences of the next halving. First, more and more experts argue that the traditional Bitcoin price cycle has now been broken by the strong advance of the crypto derivatives market. And although Bitcoin saw a huge rally in late 2020, a few months after the May 2020 halving, it was mainly driven by Tesla’s decision to buy Bitcoin and even accept it as a means of payment.
However, we can also argue that it is precisely because of the halving and the dwindling supply of Bitcoins circulating on the markets that large investors such as Tesla, BlackRockand institutions such as JP Morgan have gotten into the cryptocurrency.
Bitcoin’s historical trend and the cryptocurrency’s potential to completely shake up traditional finance are too powerful to continue to ignore. Those who fear fraud can take comfort in the fact that the European Union is working with major players in the sector to enforce transparency and information about crypto users. A savvy investor will not throw away his savings to switch completely to crypto, as many fanatics did in 2021, but will certainly buy some Bitcoin so as not to miss a good entry point.
