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Bitcoin halving: What it means for investors

What is Bitcoin Halving

Ultimately, the price of Bitcoin is determined by a variety of factors. These include market demand and sentiment, plus regulatory developments. At the current Bitcoin price, 6.25 BTC is worth about $193,750, a decent incentive for miners to keep adding blocks of Bitcoin transactions running smoothly. A decentralized network of validators verify all Bitcoin transactions in a process called mining. They are paid 6.25 BTC when they are the first to use complex math to add a group of transactions to the Bitcoin blockchain as part of its proof-of-work mechanism.

Blocks on a blockchain contain the record of all the transactions that have taken place on that network. Thus, as the transactions on the network increase, more blocks are added to the blockchain. Upon reaching the 21 million mark, the creation of new bitcoins will cease. Bitcoin halving ensures that the amount of bitcoin that can be mined with each block decreases, making bitcoin more scarce, and ultimately, more valuable. Of course, other market movements during the time affected Bitcoin’s price.

Bitcoin mining

Following the first halving in 2012, the price of Bitcoin surged from less than $12 to about $1,000 within a year. Similarly, after the 2016 halving, Bitcoin’s price substantially increased to $20,000 by the end of 2017. This characteristic aligns Bitcoin with traditional stores of value like gold. Some investors view Bitcoin as a hedge against inflation and a potential safe-haven asset. As more individuals and institutions adopt Bitcoin as part of their investment strategy, its demand and price may experience sustained growth over the long term.

It operates on a decentralized blockchain, eliminating intermediaries in financial transactions. Often likened to digital gold, Bitcoin’s value lies in its scarcity, portability, immutability and divisibility. With its capped supply and deflationary nature, Bitcoin is an increasingly popular alternative asset, hedging against inflation.

Will Bitcoin rise after halving?

Bitcoin is a decentralized currency, meaning no central authority controls how and when new coins are circulated. This task of circulation is assumed by Bitcoin halving, which limits the frequency with which the decentralized asset is released. The PoW mining protocol operates on the principle that the first person to solve a problem gets rewarded. However, this is no mean feat as these problems are always highly complex and often require specialized mining rigs to solve. At a roughly $2 trillion market cap, Bitcoin would still be less valuable than Apple, which is currently worth $2.7 trillion, and Microsoft, with a value of $2.5 trillion.

What is Bitcoin Halving

Mining is the main intent behind the blockchain network and consensus mechanism. The reward of bitcoin is a byproduct of the mining process that acts as an incentive What is Bitcoin Halving to participate in securing the blockchain. That might seem like a lot, but consider that the total value of all the gold on Earth is about $12.5 trillion.

Trading platforms

Miner capitulation is an important factor to consider if you wish to identify the price-based potential of a halving event. As a standalone indicator, long-term capitulation often coincides with price bottoms. However, you must pair the miner capitulation indicator with the likes of difficulty drop, hash rate, and price moves to confirm the actual bottoms. If we can consider that 90% of the miner revenue comes from block rewards — at 6.25 BTC per block, the next having is expected to make the same drop anywhere between 70% to 80%.