The next major event in cryptocurrency is due to take place in a couple of hours.
Bitcoin Halving is the event where the payout of Bitcoins to miners is literally halved. This occurs once every 210,000 blocks are mined on the Bitcoin blockchain, which takes about 4 years.
Why are investors watching the Bitcoin Halving closely?
You see, unlike cash, Bitcoin is designed to have a fixed supply cap of 21 million coins. The Bitcoin Halving event was designed as a control over the issuance of new Bitcoins over time.
The halving reduces the rate at which new bitcoins are created, leading to increased scarcity. This scarcity adds to Bitcoin’s value proposition, assuming that when supply is low, demand would go up.
Hence, investors are expecting a spike in Bitcoin prices after the halving.
On the other hand, the cost of mining Bitcoin is due to increase after the halving. Bitcoin miners will need to find ways to lower their costs or devise new ways to extract value from their current setup. So, if you’re invested in Bitcoin mining stocks, you may want to reevaluate your holdings.
Will Bitcoin go up after the halving?
Historically, Bitcoin halving events have been associated with bull markets and significant price increases in the months leading up to and following the event.
Although Bitcoin prices are known to be volatile, it is worth noting that Bitcoin have remained above the price of previous halvings too:
This pattern suggests that investors anticipate the supply reduction and its potential impact on price, leading to increased demand and upward price pressure.
This anticipation could lead to increased attention and positive sentiment in the market, potentially attracting new investors and participants.
This year, we might see a significant impact of this anticipation since the approval of Bitcoin Spot ETFs. With a more convenient vehicle to access Bitcoin, the halving event might attract retail investors who could bring in even more capital, pushing Bitcoin to greater heights.
That said…
Stay Cautious of the Hype
While it is important to note that the halving is often seen as a positive factor, the crypto market is complex, influenced by various factors, and can be subject to volatility.
Without proper guidance and education, entering the crypto space because of hype will often lead to losses. As such, investors should conduct thorough research, understand the risks involved and consider various factors before making any investment decisions.
tl;dr. Bitcoin Halving controls the issuance of Bitcoins. While demand for Bitcoin might fluctuate, the supply of new Bitcoins will be halved indefinitely from this point. The current correction might offer a good entry point before the impending halving. However, you should recognise that cryptocurrencies remain a highly speculative vehicle.
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