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2024 will be an important year for the cryptocurrency world. It will be the year of a new Bitcoin Halving, which means that everything we believed about this cryptocurrency may change.
It is time to know what the Bitcoin Halving is, how it will impact the market and how traders should react to this situation.
Before getting to know Bitcoin halving, it is important to grasp the concept of block halving: it's about the process of reducing the generation of cryptocurrency units within a given time period. Specifically, it refers to the periodic event achieved by reducing the block rewards provided to miners.
Bitcoin halving does not rely on any third party or central authority, as its mechanism is encoded in the Bitcoin software, and the entire process occurs automatically.
According to the Bitcoin halving schedule, the halving occurs after mining approximately 210,000 new blocks, which is approximately every 4 years. This process will continue until the total supply of 21 million Bitcoins is mined, which is estimated to happen around the year 2140.
Block halving could be considered a core element of the cryptocurrency economic model, as it ensures a predictable rate of token issuance. When the rewards allocated to miners decline, the supply becomes constrained, and the halving event is thereby offsetting inflation by maintaining scarcity.
Bitcoin is designed with a fixed supply and a predictable inflation schedule, whereas fiat currencies are inherently issued in infinite increments. This controlled monetary inflation rate is one of the key differences between cryptocurrencies and traditional fiat currencies.
*Source: https://www.researchgate.net/figure/bitcoin-inflation-vs-time_fig1_263617756*
The next bitcoin halving is expected to occur in April 2024, when the number of blocks hits 740,000. It will see the block reward fall from 6.25 to 3.125 bitcoins. The exact date of the halving is not yet known as the time taken to generate new blocks varies, with the network averaging one block every ten minutes.
| Event | Date | Number of Blocks | Block Reward | Newly Generated BTC |
|---|---|---|---|---|
| Creación de Bitcoin | 2009/1/3 | 0 | 50 BTC | 10,500,000 BTC |
| Primer Halving | 2012/11/28 | 210,000 | 25 BTC | 5,250,000 BTC |
| Segundo Halving | 2016/7/9 | 420,000 | 12.5 BTC | 2,625,000 BTC |
| Tercer Halving | 2020/5/12 | 630,000 | 6.25 BTC | 1,312,500 BTC |
| Cuarto Halving | 2024/4(Estimated) | 740,000 | 3.125 BTC | 656,250 BTC |
*Source: https://www.ig.com/en/bitcoin-btc/bitcoin-halving*
The halving event is often considered as one of the factors that can impact the price of Bitcoin. This is because halving directly affects the supply of Bitcoin and the incentive mechanism for miners, thereby influencing the market supply and demand dynamics.
Prior to the halving, the rate of supply increase for Bitcoin is relatively high. However, once the halving occurs, the number of new Bitcoins generated per block is halved, resulting in a slowdown in the rate of supply growth. This means that the Bitcoin supply decreases within the same time frame, and if the demand remains stable or increases, the supply-demand dynamics may lead to price appreciation. Historically, Bitcoin halving events have often been associated with upward price trends.
For instance, in 2012, Bitcoin experienced an approximately 8,000% increase in price within 12 months after the reward reduction; and in 2016, there was another increase by nearly 1,000% following the reward reduction. The most recent halving occurred in May 2020, followed by a bull market that propelled the Bitcoin price to reach an all-time high of nearly $69,000 in November 2021.
However, it is important to note that the price of Bitcoin is influenced by a combination of various factors, and halving is just one of them. Other factors include macro market sentiment, investor demand, global economic conditions, adoption rates, and regulatory environment, among others. Therefore, while the halving event can potentially impact the price of Bitcoin, it does not solely determine the price movement.
Halving can have implications for the security of the Bitcoin network. When a halving event occurs and block rewards decrease, it can impact the incentives for miners.
On one hand, with reduced block rewards, mining profitability decreases. This may lead some miners, especially those with higher operational costs, to exit the network. The reduced number of miners can result in a decline in the network's hash rate, which refers to the computational power used to secure the network. This could potentially make the network more vulnerable to attacks, such as a 51% attack, where an entity controls over half of the network's computing power and can manipulate it.
On the other hand, lower block rewards may intensify competition among miners as they seek to offset the reduced income with higher transaction fees. This can lead to an increase in transaction fees, especially during periods of network congestion. Higher transaction fees can limit the feasibility of small-value transactions and impact the usability and adoption of Bitcoin.
Although halving may have some impact on network security, the Bitcoin network has robust decentralized features and security protocols to mitigate these potential risks. Additionally, as the price of Bitcoin increases, miner revenues may be compensated after halving as the Bitcoins they earn may have a higher value due to price appreciation. Overall, while halving does not pose a significant threat to the security of the Bitcoin network, it is important to closely monitor network dynamics and associated risks.
Bitcoin halving impacts the dynamics of the network and the interactions among various stakeholders in the Bitcoin ecosystem, including miners, users, developers, and exchanges. The effects of halving can vary depending on how stakeholders adapt to it. For example, it can stimulate the development of new technologies and solutions to improve mining efficiency and profitability, such as the adoption of renewable energy, optimization of hardware and software, and the emergence of new mining pools and protocols.
Furthermore, halving may attract more attention and interest from the general public, media, institutions, and regulatory bodies, who may perceive it as a sign of network maturity and credibility or as a source of uncertainty and volatility.
Lastly, halving can impact the supply and demand dynamics of Bitcoin and the expectations and sentiments of market participants. They may interpret halving as a bullish or bearish event based on their own perspectives and strategies.
Overall, halving has wide-ranging implications that shape the Bitcoin ecosystem. It prompts innovation, influences public perception, and affects market dynamics, requiring stakeholders to adapt and respond accordingly.
Bitcoin halving is a pre-determined event, and its impact on value can vary and be influenced by numerous factors. Therefore, it is important to understand halving as one of many factors that can affect the value of Bitcoin and to focus on the overall growth of the network.
You can mitigate some of the associated risks by trading Bitcoin Contracts, which allow you to take long or short positions on the price movements of Bitcoin without actually owning the underlying asset. However, please remember that any form of trading carries risks. While you have the potential to make profits, the potential risks should not exceed the losses you can afford.
It's essential to approach trading and investment with caution, conduct thorough research, and consider your risk tolerance and financial circumstances before engaging in any trading activities. Additionally, seeking advice from financial professionals or experts in the field can provide valuable insights and guidance. In our ****TruBit Telegram Group, we share lots of market analyses and tips for crypto trading, and you're always welcome to join us!
TruBit/TruBit Pro currently supports Mexican users buying cryptocurrencies via Bank Transfer. The best thing is that when making the purchase, the amount of their MXN (fiat currency of Mexico) will automatically be converted into MMXN and users will be able to trade cryptos in TruBit.
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Also, users in other regions can use Third-party Payment Platforms, such as Banxa or Mercuryo, to purchase cryptocurrencies. For more information, please consult the following articles:
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Finally, we also recommend you use P2P services to buy cryptocurrencies. P2P commerce can be interpreted as the action of buying and selling cryptocurrencies directly between users, without a third party or intermediary that carries out said transaction. Currently in TruBit Pro, this service is totally free!!
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https://www.trubit.com/new/buy-crypto
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