Bitcoin Halving: What is it? How will it affect crypto investors? EXPLAINED
Bitcoin “halving” adjusts the reward miners get for verifying transactions and adding them to the blockchain. Initially, it distributed 50 bitcoins per block, halving every 210,000 blocks. On Friday, Bitcoin had its latest “halving.” This means the reward for mining Bitcoin was cut in half. It might change how the currency’s market works in the future.
On Friday, Bitcoin had its latest “halving.” This means the reward for mining Bitcoin was cut in half. It might change how the currency’s market works in the future.
But what is that? Well, “halving,” is a process that gradually reduces the rate at which new bitcoins are generated, thereby limiting the overall supply.
Here we will discuss what is halving and what are its implications on Bitcoin and the overall market.
But first, let’s clarify that this is a pre-programmed adjustment that happens every four years and is critical for controlling Bitcoin’s supply. Following the event, Bitcoin’s price was constant at around $63,907, as cited in a TOI report.
With the reduction in new Bitcoin production, various implications arise for miners and the overall market, stirring both concerns and expectations among investors and analysts.
What does “halving” mean for Bitcoin exactly?
Bitcoin “halving” adjusts the reward miners get for verifying transactions and adding them to the blockchain. Initially, it distributed 50 bitcoins per block, halving every 210,000 blocks.
The latest halving cut the reward from 6.25 to 3.125 bitcoins per block. This ensures Bitcoin’s total supply caps at 21 million, creating scarcity like precious metals such as gold.
Impact on Bitcoin miners
Halving directly reduces miners’ earnings by 50%, impacting profitability significantly. High mining costs, like electricity and hardware, mean only the most efficient operations remain profitable.
This may lead to increased industry consolidation, heightening mining operation centralization.
Bitcoin Halving: Impact on Bitcoin’s price
Historically, halving events preceded substantial price surges. For example, post-2020 halving, Bitcoin’s price surged nearly seven-fold by the following year.
However, as per a TOI report, experts said that past performance may not predict future results, where market conditions play a major role. Analysts are divided, with some predicting major rallies and others warning of halving effects already priced in.
Beyond mining and prices, halving preserves Bitcoin’s value by controlling inflation, crucial for its proposition as ‘digital gold’. However, reduced supply may increase price volatility due to fluctuating demand.
There are anticipated to be 64 Bitcoin halvings before hitting the 21 million cap around 2140. Afterward, halvings will stop, and the blockchain will no longer issue new tokens.
