Bitcoin is one of the oldest and currently most popular cryptocurrencies. This virtual currency was created already in 2009, but it has only enjoyed greater popularity in recent years. It was created so that it could not be influenced by any government or central bank.
Cybercoins are “minted” by a network of computers with specialized software programmed to release new coins at a steady but ever-decreasing rate. This is the halving just mentioned. “It is a mechanism that represents one of the main advantages of Bitcoin. It enables a gradual decrease in the supply of bitcoin, which increases its value over time,” Štěpán Uherík, financial director of SatoshiLabs, which produces Trezor crypto-wallets, explained to Novinky.cz.
“Because Bitcoin is decentralized, the halving cannot be canceled, delayed or controlled in any way. In this, Bitcoin is radically different from ordinary money, over the emission of which the state has complete control. Halving is an iron certainty in this sense. Bitcoin behaves exactly as we have known since its inception,” added Uherík.
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Bitcoin will not be mined until 2140
In practice, this means that there will be fewer bitcoins after the halving, or that it will take longer to mine them. “Prior to the current halving, approximately 329,000 new bitcoins were created each year, which represented an increase of approximately 1.8% in the amount of bitcoins in the market. After this year’s event, however, this number will decrease to 165,000 new bitcoins per year, which represents only 0.9%,” Roman Valihrach, founder and CEO of the Czech cryptocurrency exchange Coinmate, described the specific market situation for Novinky.cz.
“Fixed falling inflation is thus one of the main attributes for Bitcoin’s store of value property. Halving can thus have a significant impact on the value of bitcoin and its investment attractiveness,” added Valihrach.
The number of coins in circulation should eventually reach 21 million, which should happen around 2140.
Historically, we could see an increase in price before the halving, a stabilization just after it, and a sharp increase in value in the following period.
Anna Štrébl, director of the Confirmo payment gateway
Currently, the nearest halving is expected on the night from Friday to Saturday around 2 a.m. CET. Cryptocurrency fans are now impatiently waiting to see what the Bitcoin halving will bring them. Cryptocurrency experts more or less agree that the rate will rise again.
“Historically, we could see an increase in price before the halving, a stabilization shortly after, and a sharp increase in value in the following period. That is why we can expect a correction after the halving even now,” Anna Štrébl, director of the payment gateway Confirmo, told Novinky.cz.
The exchange rate may well go down
However, the growth of the exchange rate may only become apparent after a longer period of time. “Bitcoin halvings have historically always had a very significant impact on price. If only because the basic economic equation says: a decrease in supply for the same demand means a higher price. However, it is necessary to take into account that this will not happen immediately. On the contrary, even a small correction may come before this new market dynamic has time to manifest itself,” Valihrach pointed out that after the halving, the bitcoin exchange rate may well fall.
“Furthermore, this year, the direct price impact of the halving is somewhat overshadowed by the recent approval of spot bitcoin ETFs, which brought increased investor interest to the market. In three months, over 200,000 bitcoins were bought into these ETF products from the open market, while in the same period after the halving, the emission of bitcoin will be reduced by only 41,000. Thus, some believe that the halving may lose its significance. However, I believe that the combined effect of the halving and the ETF can create interesting movements in the price of Bitcoin, although it may take several months for the effect to fully manifest itself,” added Valihrach.
For the sake of completeness, let’s add that bitcoin started trading this year for CZK 946,227. But since mid-January, the value has grown significantly. This happened just after 11 bitcoin ETFs were approved in the US – the abbreviation ETF stands for an exchange-traded fund. One virtual coin is currently traded for CZK 1,549,107.
So far, the absolute record was set this year in mid-March at 1,704,367 CZK. Since the inception of this cryptocurrency, the value has never been higher.
Uherík is also cautious with his predictions about the development of the exchange rate: “We can only speculate about whether or how much the halving will be reflected in the price. It can be said that it has probably already been partially reflected and contributed to the rapid increase in the price in recent months.”
“In addition, the current situation is unique in that the price of Bitcoin reached an all-time high before the halving itself and not after it, as was the case historically. It may mean that the price will not rise as much now, or on the contrary, it will rise even more and surpass the all-time high of March. But you need to be careful and remember that every wave of growth has always been followed by a decline,” added Uherík.
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