Cracking the Code: Bitcoin's Halving and Its Impact

Every few years, the crypto world buzzes with anticipation over a particular event. You might have heard about it, but if not, it’s crucial to grasp its significance and long-term effects. We’re talking about the Bitcoin halving: a recurring event that unfolds approximately every four years. Pinning down the exact date proves challenging, as it occurs each time 210,000 blocks are mined. During this event, miners’ rewards are cut in half.

In 2009, when Bitcoin emerged, miners were rewarded with 50 bitcoins for each block they mined. Following the first halving event in 2012, this reward was decreased to 25 bitcoins. Subsequent halvings occurred in 2016 and 2020, reducing rewards to 12.5 and 6.25 bitcoins per block. This year’s halving, scheduled for April 20, will reduce the mining reward to 3,125 BTC. What exactly are the implications of this event? It’s crucial to understand that Bitcoin was designed with a maximum supply of 21 million units, establishing it as a finite asset.

Why is it crucial to grasp this concept? Reducing the rate at which new bitcoins are issued, effectively creates artificial scarcity in the supply. This fosters a bullish sentiment within the market, as the limited creation drives up the value of existing bitcoins. The combination of reduced supply and increased demand results in a rise in value, a fundamental principle of economics often overlooked in some countries… Many central banks’ continuous issuance of fiat currency, inevitably leads to inflation, a tax that disproportionately burdens the lowest-income citizens.

Halving serves as a mechanism to curb Bitcoin inflation and fortify its long-term value. Historically, this event has been accompanied by remarkable surges in Bitcoin’s value. How significant were these increases? Well, back in November 2012, Bitcoin was priced at approximately $12.15 per unit. This figure gradually climbed to around $1,150 by December 2013, marking an astonishing surge of over 9,000%. In July 2016, during the second halving, Bitcoin’s value was $650 per BTC, soaring to almost $20,000 by December 2017 (representing an appreciation of roughly 3,000%). During the 2020 halving in May, Bitcoin was trading at around $8,500, and nearly a year later, it had surpassed $64,000 – an increase of over 600%.

We hope you’ve been able to accumulate as much BTC as possible. This message comes from someone who believes that stablecoins are essential in this sector, yet chose to prioritize them less in light of the event that will soon have a positive impact on the Bitcoin market. While multiple experts hold differing opinions on the impact of this upcoming halving - ETFs have played a key role in this bull cycle - the truth is that the supply-demand shock will attract a high volume of buyers, leading to a highly positive influence on the price.

“While this new halving may potentially have a smaller impact on the market compared to previous occasions, its effect will certainly not go unnoticed by investors. The day-to-day activities of our clients at Onyze suggest that the current trend is bullish. I think that Bitcoin could surpass the $100,000 valuation”.

Ángel Luis Quesada, CEO of Onyze.

After the 2024 halving, some will discover that continuing operations with their current hardware is no longer profitable. This will prompt them to seek more efficient methods to sustain their businesses. To stay competitive, miners can improve energy efficiency and upgrade to more advanced hardware, driving innovation in the sector. Since energy costs represent a significant expense, some miners will choose to explore locations with more favorable government regulations or transition to renewable energy sources.

“We believe the valuation dynamics should not change in this or the next halvings. Bitcoin is expected to sustain robust demand and, consequently, experience appreciation in the medium and long term, particularly following the launch of the ETF in the US market”.

Renato Nobile, Buena Vista Capital analyst.

Bitcoin halving brings forth highly positive implications, not only for the cryptocurrency’s value itself but also for long-term market strengthening. If you missed the strategic opportunity of the 2020 event and have since gained a solid understanding, now may be a good time to assess your options before Bitcoin solidifies its position further as the most influential crypto asset in the global financial landscape.

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