It's no new that there's a countdown on the bitcoin halving month. While most crypto traders are anxiously anticipating this year as they'll be a pump in the price of bitcoin, some are confused as to what the halving means and how it differs from the bull year. This post explains in details what the halving is and why it's important. Before delving into it, let's look at this cycle.
Bull year = Bear Year = Accumulation year = Bitcoin halving
Bitcoin halving known as the halvening in crypto is a precoded event that happens every 4 years in the Bitcoin protocol [every 210,000 blocks]. This Bitcoin halving follows the market cycle in crypto which starts from the bull year, bear market, accumulation year and bitcoin having. From this cycle, we have seen it happens every 4 years and the last bitcoin having year was 2020. What happened in this year?
The reward miners receive for validating blockchain transactions is reduced and this halving process is designed to control the issuance of new bitcoins and also ensure a limited bitcoin supply making it most scarce than ever. The creator of Bitcoin actually made the supply of these asset fixed which has prevented inflation and has followed the scarcity of gold which seems to be a scarce asset because of its value. The fixed supply is 21 million bitcoins in circulation.
By regulating the rate at which new bitcoins are created, the protocol aims to create a currency that would be deflationary with the potential to hold its value and increase with time. This bitcoin halving does play an important role in this control are stated earlier.
Source
It's controls the rate at which new bitcoins are introduced into circulation, slowing down the creation of new bitcoins over time. Miners do receive 50 BTC as rewards for each validated blocks added successfully into the blockchain but these has been changed over time as the Bitcoin having started in 2012. This having reduces the miners reward to 25 BTC from 50 BTC and subsequent halving like in 2016 and 2020, there was still further decrease as it is divided by two.
In 2016, it was reduced from 25 to 12.5 and in 2020, it was reduced from 12.5 to 6.25 bitcoins.
When is the next halving? Like I said, it happens every 4 years so 4 years from 2020 is 2024 and it is expected to occur in April where they reward for block validation by miners would be reduced from 6.25 to 3.125. i.e when the height reaches **840,000. Currently, we have undergone 3 halvings since bitcoin launch and it will continue until the 8th halving.
After the Bitcoin halving events has been completed, are bitcoin Holdings remain unchanged. The halving doesn't affect the number of Bitcoin one holds but it can indirectly affect bitcoins price and other aspects of the crypto ecosystem. Reasons why investors and Traders pay close attention to it and even monitor it from the prediction or timing.
Bitcoin halving reduces the rate at which new bitcoins are created and they supply is constrained. This in turn affects the balance between supply and demand which leads to a shift in the market value of bitcoin.
When there is a decrease in supply and demand increases or remain unchanged, the value of the asset is likely to increase which leads to a surge in investor interest and speculations in Bitcoin.
This housing is associated with volatility in the crypto market that is why investors monitor and follow up market movement leading to the events and they tried to predict its impact on the price of Bitcoin which leads to increase trading activities. The halving also prompt discussions and debates in the blockchain community.
In conclusion, the having of Bitcoin is a fundamental pillar of the crypto ecosystem that shapes the trajectory of bitcoins future. It is likely to cause a chain in the crypto market this year of which Traders are eagerly anticipating. Why does bitcoin halving happens every 4 years? This would be discussed in my next post.
Disclaimer :Any financial and crypto market information provided in this post was written for informational purposes only and does not constitute 100% investment advice. It's just basic knowledge every crypto trader or investor should have
