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In a matter of months, the world of Bitcoin and digital currencies will experience another historic event: the fourth Bitcoin halving expected in April 2024. This moment of anticipation and speculation serves as a high-stakes litmus test for both Bitcoin miners as for cryptocurrencies. market.
It is an event that has previously catalyzed monumental changes in the market and could do so again.
JUST IN - We are now 80% through the next #Bitcoin halve
HODL ON โ pic.twitter.com/OIeEmVLYBt
โ Bitcoin Magazine (@BitcoinMagazine) July 14, 2023
Bitcoin halving is a unique feature of the Bitcoin supply algorithm, where the rewards for miners are halved every 210,000 blocks of transactions, which occurs approximately every four years. Satoshi Nakamoto, the creator of Bitcoin, linked the creation of BTC to its anti-counterfeiting mechanism: the complex computational mining process that validates transactions on the blockchain.
Initially, the mining reward for a block was 50 BTC; by 2024, this reward is scheduled to be 3,125 BTC.
The question that confronts us now is how this halving will affect Bitcoin and the overall crypto landscape. Historically, halvings have been associated with skyrocketing price movements. The halvings in 2012 and 2016 sparked bull runs, with BTC valuations soaring by roughly 8,000% and 1,000%, respectively. More recently, the 2020 halving sparked a run that peaked with a record Bitcoin price of nearly $69,000 in November 2021.
However, numerous factors contribute to the complex dynamics of the market. Bitcoin price movements have often coincided with other major events, as a broader general recognitionthe proliferation of initial coin offerings (ICOs) and technological advances.
The economic climate presents a potential brake on halving hype, with reduced expectations for interest rate cuts from the US Federal Reserve and strict regulatory scrutiny of cryptocurrencies around the world. Predicting a halving-induced bull run is far from a safe bet. As skepticism around the impact of the halving gains strength, other factors, including macroeconomic trends and regulatory frameworks could take precedence over the Bitcoin price setup than the halving.
Meanwhile, Bitcoin miners, those who actually provide the industry with new BTC, are facing a troubling reality. Bitcoin mining, already a substantial resource demanding operation, will become even more challenging with dwindling rewards. A Bloomberg report interviewed Jaran Mellerud, crypto mining analyst at Hashrate Index, who predicted:
โAlmost half of the miners will suffer as they have less efficient mining operations with higher costs.โ
A sizable portion of miners could see an increase of $0.08k/h, which could signal potential consolidation or even an exodus within the mining industry, Mellerud predicted.
Wolfie Zhao, head of research at Blockbridge, told Bloomberg that currently, public mining companies pay between $10,000 and $15,000 per Bitcoin mined. However, estimates suggest that BTC will cost between $20,000 and $30,000 to mine:
However, for the average Bitcoin holder, the impact of the halving will be mostly indirect. The event itself will not change the amount of BTC in your holdings, but its potential effect on price will be the most significant.
It could also very well serve as a springboard for another cyclical bull run or bring about a period of turbulence and consolidation. While the answer remains unclear, one thing is certain: the next few months will be a defining period for Bitcoin, its miners, and the global cryptocurrency ecosystem.
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