Exchange rates:
545250
Exchangers:
384
Updated:
08:57:22

Halving and why everyone is talking about it?

Initially, since the launch of the blockchain, all miners received 50 BTC for each mined block, but the cryptocurrency's algorithm is designed in such a way that the reward is halved every 210,000 blocks.

One might think that you can keep halving indefinitely until the quantity becomes negligible. However, if you examine the Bitcoin's code, you'll find that it is programmed for only 64 halvings. Due to the fact that the halving occurs through "right bitwise shift" (which is a technical term analogous to integer division by 2), after the 33rd halving, the reward will reach the mark of 0.

The main myth: there will be exactly 21 million bitcoins.

If you examine the formula, the actual production will stop at 20,999,999 bitcoins and 97,690,000 satoshis. The approximate last mining reward will be issued around the year 2140.

Why is this halving needed?

Primarily, by reducing the miners' reward for a mined block, its developer made the cryptocurrency's issuance controlled, which helps to control monetary inflation.

Furthermore, the fact that traditional money can be printed endlessly, which constantly devalues it, served as the main reason for creating bitcoin. On the other hand, new bitcoin coins will be released onto the market at a slower rate, which helps curb its inflation.

Why is everyone talking about it?

The reason is that after each previous halving, the price of the first cryptocurrency multiplied. For example, after the first reward reduction, the price rose from $11 to $1,100, after the second, from $600 to $20,000, and after the third, from $3,000 to $69,000.

Most analysts expect this pattern to continue. However, no one guarantees that the bitcoin price will show such impressive growth again.

Why does the price increase?

In reality, there are several reasons. The first and main one is the "self-fulfilling" prophecy. If everyone is convinced that the price should increase every four years, investors start buying and selling the asset with that periodicity, creating an artificial imbalance in the supply and demand balance in the market, which leads to price growth.

The second reason is also related to the supply and demand balance but on a more practical level. The main suppliers of bitcoins in the market are miners. After the reward reduction for a mined block, mining profitability decreases by half, and they sell only half as many new coins, which increases scarcity and naturally leads to price growth.

There are many other theories and assumptions, but none of them are as popular as the first two reasons.

When is the next halving?

If we consider that mining difficulty adjusts in such a way that a new block is mined every 10 minutes, it results in a period of approximately four years between these reductions.

Approximately, this should happen in May 2024.

But it is worth noting that by the time the halving occurs, the event is already reflected in the price. Historically, the rise in the price of bitcoin begins about a year before the halving, solely based on investors' expectations, although the main growth indeed happens after it.

Considering the data from previous years, the current correction fits into such a scenario, and the projected new growth cycle should reach its peak around August 2025.

After that, the price will plummet by about 80% in a matter of weeks. Thus, the "bottom" of the next cycle may be reached around October 2026, assuming the cycle lasts approximately 205 weeks.

© BestChange.com – , updated 07/05/2023
Reprints are allowed only with permission of BestChange

See also