The impact of the next Bitcoin halving
$Bitcoin(BTC.CC$ So far, Bitcoin's halvings have always heralded a sharp increase in the cryptocurrency's price.
For instance, one Bitcoin was worth $12 on the first reward cut in 2012. One year later, the price peaked at $1,170 before backing down again. The 2016 halving sent Bitcoin prices from $640 to $19,650 in 17 months. The latest reduction in mining rewards took place in May 2020 at a price of $8,600. 18 months later, that price cycle topped out at $67,500.
Past performance is no guarantee of future results, but Bitcoin breaks that rule of thumb in some ways.
- The halvings are quite predictable. They will happen roughly every four years, radically changing the economics of Bitcoin mining each time.
- The mining process serves a crucial purpose in the processing of Bitcoin transactions. Without it, the blockchain grinds to a halt. Therefore, the whole system makes sense only as long as miners receive enough rewards to run a successful business. And when the mining rewards are cut in half, a steady consumption of processing cycles and electric power will produce half as many Bitcoin tokens. Bitcoin miners would go out of business if prices don't rise over time.
- Therefore, halvings almost inevitably lead to higher Bitcoin prices. It's not the only factor in play when market makers determine Bitcoin's real-time price, but arguably the most important and predictable pattern-making tool on the encrypted table. The inevitability of this trend will only break if Bitcoin itself goes out of fashion and shuts down. So, the pattern of dramatic price increases in the months after each halving will continue as long as Bitcoin has a future.
- And the next halving may indeed be different, as the inflation rate below gold's annual production increase suggests a game-changing level of value-guarding stability.
For instance, one Bitcoin was worth $12 on the first reward cut in 2012. One year later, the price peaked at $1,170 before backing down again. The 2016 halving sent Bitcoin prices from $640 to $19,650 in 17 months. The latest reduction in mining rewards took place in May 2020 at a price of $8,600. 18 months later, that price cycle topped out at $67,500.
Past performance is no guarantee of future results, but Bitcoin breaks that rule of thumb in some ways.
- The halvings are quite predictable. They will happen roughly every four years, radically changing the economics of Bitcoin mining each time.
- The mining process serves a crucial purpose in the processing of Bitcoin transactions. Without it, the blockchain grinds to a halt. Therefore, the whole system makes sense only as long as miners receive enough rewards to run a successful business. And when the mining rewards are cut in half, a steady consumption of processing cycles and electric power will produce half as many Bitcoin tokens. Bitcoin miners would go out of business if prices don't rise over time.
- Therefore, halvings almost inevitably lead to higher Bitcoin prices. It's not the only factor in play when market makers determine Bitcoin's real-time price, but arguably the most important and predictable pattern-making tool on the encrypted table. The inevitability of this trend will only break if Bitcoin itself goes out of fashion and shuts down. So, the pattern of dramatic price increases in the months after each halving will continue as long as Bitcoin has a future.
- And the next halving may indeed be different, as the inflation rate below gold's annual production increase suggests a game-changing level of value-guarding stability.
The crypto market as a whole, and Bitcoin in particular, still faces numerous headwinds and challenges. The progress of digital currencies can stumble on legal and regulatory roadblocks, on slow uptake of crypto-based services in the consumer market, and on unexpected technology jumps, just to name a few potential game-breakers. But the steady rhythm of scheduled mining-reward halvings will continue regardless, resulting in rock-solid stability or the end of the Bitcoin world.
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