Will Bitcoin Price Increase After Halving?

In this article we discuss how bitcoin halvings can affect its price and what implications it has for investors.

Will Bitcoin Price Increase After Halving?

In a nutshell, a Bitcoin halving is the process of reducing the rewards of mining Bitcoin after each set of 210,000 blocks is mined. By cutting the rewards of Bitcoin mining as more blocks are mined, a halving of Bitcoin limits the supply of new coins, so prices could rise if demand remains strong. Halvings reduce the rate at which new currencies are created and, therefore, decrease the available amount of new supply, even as demand increases. This has some implications for investors, as other assets with a low or limited supply, such as gold, can be in high demand and drive up prices. One of the main factors driving Bitcoin's price increase is the rate at which new consumers buy and explore cryptocurrency, according to Waltman.

Every day, approximately 900 new Bitcoins are mined and entered digital circulation, while faster mining rates have resulted in higher mining rates, so there could be more. So how does the Bitcoin halving cycle work? Miners were being paid 50 BTC per block when the cryptocurrency was initially established. The halving event has historically been bearish for Bitcoin and is likely to affect sentiment again this time, but Bitcoin's short-term price action will remain difficult to predict. When a block is filled with transactions, miners who processed and confirmed transactions within the block are rewarded with bitcoins. The halving influences the speed at which new coins enter circulation, which can affect the value of existing Bitcoin holdings.

According to Swift, the AASI is currently “back in the green zone”, suggesting that Bitcoin's “price change is at a reasonable level relative to the active change of direction. This is a good warning for long-term Bitcoin bulls to avoid timing the market based on past cycles; those who sell now in anticipation of a third bearish year might very well end up missing a rally. Since the Bitcoin halving is an important event, it has a major effect on various parties involved in the Bitcoin network. To see the context of why miners might be more cautious, consider that the bitcoin halving event would normally raise the breakeven price for miners. Meanwhile, certain data from the bitcoin market shows that traders have bearish sentiment around the halving. Bitcoin halvings, on the other hand, are linked to massive increases in the price of BTC, giving miners an incentive to mine more even though their payments have been halved.

Bitcoin's underlying technology, blockchain, basically consists of a collection of computers (or nodes) that run the Bitcoin software and contain a partial or complete history of transactions that occur on its network. This event is known as halving because it halves the speed at which new bitcoins are released into circulation. Bitcoin adoption has been increasing at an annual rate of 113%, according to data from digital asset management firm CoinShares. Bitcoin's halving imposes synthetic price inflation on the cryptocurrency network and halves the rate at which new bitcoins are released into circulation. This can make it difficult for the average consumer to discern whether Bitcoin and other cryptocurrencies are legitimate.