How the ‘Halving’ Could Impact Bitcoin

The new entrants coming into Bitcoin via the recently launched ETF and prices bounce back up towards $50,000, it’s a good time to dig a bit into the Bitcoin halving, as we’re expected to go into another halving event in mid-April.

The Bitcoin halving cycle refers to the recurring event that reduces the blockchain rewards paid in bitcoin and given to miners for validating transactions and creating new blocks on the blockchain. This reduction occurs approximately every four years, specifically when the number of total blocks on the Bitcoin blockchain reaches a certain threshold, currently set at 210,000 blocks.

You’re reading Crypto Long & Short, our weekly newsletter featuring insights, news and analysis for the professional investor. Sign up here to get it in your inbox every Wednesday.

The halving event aims to maintain the scarcity of Bitcoin by gradually decreasing the rate at which new Bitcoins are introduced into circulation. Ultimately, this process will result in a total of 21 million Bitcoins being mined, with no more Bitcoins being generated after the final halving event.

Read more: What Is the Bitcoin Halving?

The general consensus is that Bitcoin halving events are positive for the price of Bitcoin, and historically they have been. The event often generates optimism among crypto investors, leading to positive price action afterward. This positive price movement can be attributed to several factors. Firstly, the reduction in the supply issuance rate emphasizes Bitcoin’s scarcity, which can drive up demand and consequently increase its price.

Additionally, the halving event brings attention to the crypto space, attracting new investors and contributing to increased trading activity. However, it’s important to note that while the halving historically has led to price increases, the magnitude of these increases may diminish with each subsequent halvings.

To look more closely into the effects Bitcoin halving periods have had on distribution of returns, we looked back from July 2010 to February 2024 utilizing the CoinDesk Indices Bitcoin XBX Price Index, and compare the distribution of weekly returns of…

..

Source

Recommended For You

Leave a Reply

Your email address will not be published. Required fields are marked *