Bittime -Satoshi Nakamoto, the anonymous creator of Bitcoin, still has great influence despite disappearing almost 14 years ago.
The protocol designed by Nakamoto will trigger a Bitcoin "halving" event this coming Saturday, a process that is expected to result in an increase in the price of Bitcoin. This article will discuss the details of the halving process and its potential impacts.
Bitcoin Halving: What Is It?
Halving is closely related to the way Bitcoins are recorded and created. Bitcoin transactions are recorded on a universally accessible ledger, called the blockchain. These transactions are entered into the blockchain by “miners” who then link the blocks into a chain. Miners use special hardware to solve cryptographic puzzles and in return, they receive rewards in the form of newly created Bitcoins.
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Nakamoto intended that the number of Bitcoins in circulation be limited, namely 21 million. Therefore, this protocol was created to control the number of new coins entering the market. The trick is to halve the rewards miners receive every 210,000 blocks, which happens roughly every four years.
Halving is expected to occur early Saturday morning. The reward for adding a new transaction block to the blockchain will be reduced from 6.25 Bitcoins to 3.125 Bitcoins. The halving process will continue until the 21 million Bitcoin limit is reached, which is expected to occur in 2140.
Impact on Bitcoin Price
Halving reduces the supply of new Bitcoins, which in theory should increase their price. This is based on the economic principle that if demand for an asset remains stable while supply decreases, the price will rise.
Based on data from asset research firm 10x Research, the three previous halving events (2012, 2016, and 2020) resulted in an average price increase of 16% in the 60 days that followed. However, it should be noted that the halving event in 2016 experienced a price decline of 6% in the first 60 days, but then the price rose again drastically throughout 2017.
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Markus Thielen, head of research at 10x, said that halvings are "associated with price increases due to reduced supply," but investors should wait to see the price peak, which usually occurs around 500 days after a halving.
Although Bitcoin prices have fallen sharply from record highs above $70,000 to around $62,000 in recent weeks, Bitcoin is still a strong performing asset. Bitcoin has so far risen 40% in 2024 and the price has more than doubled compared to last year.
Negative impact?
Bitcoin mining companies that incur energy and equipment costs to validate transactions will face a financial hit as their rewards decrease. Andrew O'Neill, managing director of the digital asset research lab at credit ratings firm S&P Global, wrote that "block rewards remain a significant part of miner revenue, therefore, halving rewards impacts profitability."
He added: "Some mining operations will become unprofitable and will be closed, especially those with higher energy costs."
According to S&P, for Bitcoin mining to remain financially sustainable, the currency needs to be used more widely across the global economy to increase miner revenues through transaction fees. However, the wider use of cryptocurrencies clashes with concerns that energy-intensive Bitcoin mining is no longer environmentally friendly.
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Bitcoin critics also highlight the negative impact of the halving event which can attract amateur investors to dive into the world of cryptocurrency due to the price increase and the accompanying hype.
Bitcoin has gained legitimacy this year, marked by rising prices and clearance from the United States Securities and Exchange Commission (SEC) for exchange-traded funds (ETFs) that track Bitcoin prices. Despite this, SEC chairman Gary Gensler was reluctant to grant such permission because he considers Bitcoin a volatile asset and used for "illegal activities including ransomware, money laundering, sanctions evasion, and terrorist financing."
O'Neill is also skeptical of the potential for a price explosion. "The BTC [Bitcoin] market is in a very different place compared to when previous halving events occurred," he said. "Other driving factors such as the growth of BTC ETFs in the US, and macro factors such as interest rates and market liquidity, will also influence prices."
How to Buy BTC from Bittime
You can buy and sell crypto assets in an easy and safe way via Bittime . Bittime is one of the best crypto applications in Indonesia which is officially registered with Bappebti.
To be able to buy crypto assets on Bittime , make sure you have registered and completed identity verification. Apart from that, also make sure that you have sufficient balance by depositing some funds into your wallet. For your information, the minimum purchase of assets on Bittime is IDR 10,000. After that, you can purchase crypto assets in the application.
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Monitor price chart movements of Bitcoin (BTC) , Ethereum (ETH) , Solana (SOL) and other cryptos to find out today's crypto market trends in real-time on Bittime.
Also read:
Miners Face AI Explosion Ahead of Bitcoin Halving
Buy Bitcoin Miner Stocks Before Halving, Says Bernstein
Bitcoin: Public Mining Benefits Post Halving, BTC/IDR Potentially Fluctuating
DISCLAIMER: This article is informational in nature and is not an offer or invitation to sell or buy any crypto assets. Trading crypto assets is a high-risk activity. Crypto asset prices are volatile, where prices can change significantly from time to time and Bittime is not responsible for changes in fluctuations in crypto asset exchange rates.
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