Bitcoin Gets Halved
This week, the Bitcoin (BTC-USD) halving event will be a major focus in the cryptocurrency world. This event is significantly different from public equity “stock splits” and merits an explanation.
The exact timing of the halving is variable and depends on the network’s hash rate. Halving events occur every time 210,000 blocks on the Bitcoin blockchain have been mined, which typically happens approximately every four years. This week, the halving will take place when the 840,000th block is mined.
Historically, halving events have led to a substantial increase in the price of Bitcoin over the six months following previous halvings in 2012, 2017, and 2020. Many factors influence Bitcoin pricing, including market sentiment, adoption trends, and macroeconomic conditions. On average, BTC has appreciated by 59% in the six months following the last two halvings, although results can vary each time. Currently, the price of Bitcoin is at historical highs, and BTC is increasingly behaving like a reserve currency, or like gold, albeit unofficially, and without their long history.
As of this writing, the price of BTC is $67,378. With a circulating supply of 19,681,156 BTC, Bitcoin has a total market cap of $1.3 trillion. The amount of Bitcoin traded has risen by approximately $30 billion from April 11-12, an increase of about 62%.
Halvings will continue on the same schedule until all 21 million bitcoins have been mined, estimated to occur around the year 2140. This fixed schedule affords Bitcoin its unique status as a programmatically disinflationary asset.
Participants use computers or “mining hardware” to engage in Bitcoin’s blockchain network as transaction processors and validators. Miners receive rewards and transaction fees for their contributions. Bitcoin employs a proof of work (POW) concept to validate transaction information, requiring time and energy. The upcoming halving will halve the rate at which new bitcoins are created by reducing the reward for miners who maintain the Bitcoin network. This increase in scarcity is intended to enhance the value of their mining fees and Bitcoin itself. When the halving takes effect, miners’ block rewards will drop from 6.25 BTC to 3.125 BTC.
As we approach this week’s milestone, in a larger sense, stakeholders in the cryptocurrency ecosystem are closely monitoring its impact, which may set the stage for Bitcoin’s role as a more sanctioned currency or possibly a digital reserve currency in the near future.