What is Bitcoin Halving? What to expect from Bitcoin prices – Forbes

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What is Bitcoin Halving?  What to expect from Bitcoin prices – Forbes

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The highly anticipated Bitcoin halving event, a somewhat mysterious phenomenon that occurs every four years, should theoretically have a major favorable effect on Bitcoin’s price stagnation over the past few weeks.

Highlights

The halving event refers to the 50% reduction in new bitcoins available daily to digital miners who unlock tokens on the blockchain through a complex and energy-intensive process.

The halving has already happened in 2012, 2016 and 2020 and is programmed directly into the Bitcoin ecosystem to occur every four years, with the fourth occurrence widely expected on Saturday or within a few days, thereby reducing the amount of bitcoins available for mining every day. from 900 to 450.

There are now between 19 and 20 million bitcoins in existence, with only 21 million tokens scheduled to exist, and the halvings are designed to keep the supply of bitcoin limited and maintain the decentralized currency’s storage of value.

By reducing supply, some expect the halving by 2024 to boost demand for bitcoin, and therefore its price, which happened immediately after the other three events.

Bitcoin rose 8,069% in the 12 months after the 2012 halving, 284% after the 2016 halving, and 559% after the 2020 halving. pretty much economics 101″ that bitcoin prices rise after a halving, according to Tom Essaye, an analyst at Sevens Report, who explained that until demand declines and new supply decreases, “the only thing What remains to move is the price.”

Contra

It is far from certain that Bitcoin demand will remain stable or increase, and three halving data points is barely enough of a trend to definitively declare how Bitcoin prices will behave during this halving cycle . It’s often difficult to sift through the opinions of Bitcoin detractors and fanatics, but the former will tell you that Bitcoin is already overvalued given its limited use cases. But bitcoin’s ridiculous returns, which have beaten the market in recent years, are hard to ignore, even for the biggest pessimist: The $61,000 per bitcoin token fetched on Wednesday is about seven times its price at the halving of 2020, 90 times its 2016 level and 4,000 times its 2012 level.

So why are Bitcoin prices falling?

Bitcoin is about 17% below its all-time high of $73,768 set last month, with Saturday’s 10% flash crash as Iran launched a drone attack on Israel illustrating the fragile nature of the rally. Bernstein analyst Gautam Chhugani explained to clients on Wednesday that these are actually “new demand catalysts” that overlap with previous halvings that contributed to the price rise, explaining that the catalyst for current cycle has already happened: January’s approval of spot exchange-traded funds for bitcoin, which unlocked billions of dollars. dollars of new capital into bitcoin and has contributed most strongly to the positive price action, with bitcoin remaining up almost 300% since the start of last year. Chhugani expects bitcoin to reach $150,000 next year, a very optimistic forecast that is more than double its all-time high.

Tangent

Halving is likely a boon for bitcoin holders, but it poses a major challenge for miners, given that it literally cuts their potential revenue stream in half – imagine if regulations allowed McDonald’s to sell Big Macs but no fries. Shares of CleanSpark (up 38%), Marathon Digital (down 36%), and Riot Platforms (down 48%), the three largest publicly traded U.S. bitcoin miners, all underperformed bitcoin this year, Chhugani noted, adding that the halving could actually be a good thing for investors, as the pressure can lead to consolidation and more profitable companies.

Further reading

MORE FROM FORBESBitcoin collapses after Iran launches attack on Israel
MORE FROM FORBESBitcoin exceeds $70,000, but is this rebound here to last?

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