In the rapidly unfolding world of Web3 and cryptocurrency, Bitcoin remains the cornerstone of the market, especially since the launch of spot ETFs, which provide investors with a regulated and accessible way to invest in cryptocurrency indirectly.
Among Bitcoin’s many features, the halving stands out as one of the most prominent ones because it has a powerful effect on cryptocurrency economics and can be positive for its price. The upcoming halving event will occur as soon as April 2024. As time passes, Bitcoin attracts more and more attention, not only from professional traders (hedge funds or investment banks) but also from retail traders (regular people).
The fourth Bitcoin halving is just around the corner, and it’s one of those exciting surprises. According to the experts, this event comes at a point in the cryptocurrency’s history when various factors come together and help influence both its supply and demand. More exactly, Bitcoin is in a different place than it was years ago, and, as Binance data shows, the unique circumstances surrounding the halving will play an essential part for traders and investors alike.
The Next Bitcoin Halving Will Reduce the Reward for Mining To 3.125 BTC
Mining is the process by which new coins are introduced into circulation. It’s carried out using hardware and software to yield a cryptographic number that matches the criteria. When a Bitcoin is successfully mined, the miner is awarded a predetermined amount of BTC. At first, the 10-minute block reward was 50 BTC, but every 210,000 blocks, the mining reward is reduced by half.
In 2020, it was brought down to 6.25 BTC. Following the much-awaited halving in April, the Bitcoin block reward will fall to 3.125 BTC. Attention must be paid to the fact that it’s only an estimate, as blocks sometimes get found faster or slower, depending on the mining difficulty. There’s a finite supply of Bitcoins that can ever exist, with a market cap of 21 million.
More than 19 million coins have already been mined, with the rest entering the market at a decreased rate until 2040 when the last Bitcoin will have been mined. The Bitcoin halving is automatic, meaning it doesn’t rely on a third party or central authority.
The cryptocurrency’s limited supply combats inflation by limiting the number of new tokens entering the market. Individuals and groups who process transactions on the Bitcoin blockchain and mint new tokens will see their rewards cut in half.
Traders Are Placing Larger Bets on Bitcoin Via the Spot Market, Ahead of The Halving
The cryptocurrency industry has pressed for the approval of spot ETFs for years, arguing that they would lessen transaction costs, opening the sector to more traders who prefer traditional investment vehicles. In the end, the SEC approved the listing and trading of a number of spot Bitcoin ETF shares, considerably broadening access to the digital asset.
Spot Bitcoin ETFs are responsible for more than 90% of flows into cryptocurrency exchanges, pushing Bitcoin near its record high ($69,000). The successful launch of spot Bitcoin ETFs in January 2024 has attracted fresh investments from hedge funds, wealth managers, and retail traders. Former SEC official John Reed Stark believes the “greater fool” theory will take effect.
It’s a strategy of speculation by which people sell overvalued assets to the “greater fool” until it all comes crashing down. Simply put, there will always be an investor willing to pay a higher price than the intrinsic value of a security. The question now is: Is the price of Bitcoin driven purely by the greater fool theory?
Bitcoin is the exception to the rule because the number of minable BTC declines every four years, it can be bought and sold in fractions, and has the potential for massive adoption. If it is subjected to the greater fool theory and collapses one day, it won’t happen in our lifetime.
Bitcoin Has Surged More Than 50%, Hitting A Record High of $69,000
Since its genesis, Bitcoin has undergone multiple halving’s, each highlighting a significant milestone in its journey and playing a pivotal role in the trajectory of global cryptocurrency adoption. Historically, prices have reached a bottom prior to the halving, then rising for more than a year after the highly anticipated event.
The increased participation of high-income individuals and institutions has pushed Bitcoin near its record high, topping $69,000. Nonetheless, the cryptocurrency market is poised for a steep correction, between 10% and 20%, even if Bitcoin will perform well. Bitcoin is able to bounce back and continue to persevere.
The Bitcoin halving doesn’t guarantee an increase in price, which means that past performance isn’t indicative of future results. This time, there’s more hype around the halving event, with traders and investors anticipating the reduced supply growth. More precisely, when the rate of new coins issued to network validators is reduced, it could be a catalyst for cryptocurrency prices.
The inflation rate of BTC will drop below 1% for the first time. While no two market cycles have ever looked identical, it’s possible the next one will play out in the same way as the previous one, having a negative impact on existing miners.
Ordinals Present a Very New Dynamic to The Bitcoin Halving This Go Around
Ordinals represent an artificial add-on to the Bitcoin blockchain. Individual Satoshis can be assigned a unique identifier and transacted with supplementary data attached. By attaching extra data to a Satoshi (image or text), the Ordinal protocol enables the creation of scarce digital assets – NFTs, in other words.
Miners, who verify Bitcoin transactions and mint new tokens, must work extra hard to process Ordinals activity following the halving. As Bitcoin’s price continues to rise, Ordinals are making a comeback, with sales across marketplaces hitting an average peak of $19.7 million. For the time being, uncommon Satoshis are quite rare.
Each normal block produces an uncommon Satoshi, and the first block of each difficulty adjustment produces a rare Satoshi, while the first block of each halving epoch produces an epic Satoshi. They’re more valuable than the inscriptions themselves. There’s no guarantee that such a theory will actually come true, but there’s a big financial incentive to start hunting.
