The upcoming Bitcoin halving might trigger a bull run

It’s less than a year until the next halving event, and numerous crypto analysts think Bitcoin might embark on a bull run and reach new highs. 

After crypto prices dropped dramatically in 2022 and several digital currencies were wiped out of the market, it feels like the last bull run was a long time ago. The last peak moment of the sector was in the second half of 2021, after a Bitcoin halving, and caused spikes in all cryptocurrencies’ prices. Since then, the crypto market has been subjected to several company closures and even a disastrous crypto winter.

Now that the next halving event is getting closer at a fast pace, Bitcoin enthusiasts are wondering what the event might bring for the largest cryptocurrency by market cap and if it’ll go through a new bull run. In the hope that prices will reach new highs in 2024, many investors buy bitcoin with credit cards now that its value is still affected by the bear market.

If you want to join the trend and add Bitcoin to your portfolio before the next halving, here is what you should know.

What is Bitcoin halving?

We mentioned the term Bitcoin halving, but if you’re new to the sector, you might need to learn what it means and how it can affect your trading strategies. As it’s well known, a multitude of factors impacts Bitcoin’s value and evolution, and one of them is the halving event, which usually takes place every four years.

In the crypto world, people often use the term block to refer to a file that contains 1MB of Bitcoin transaction records stored on the blockchain. Since its launch, Bitcoin has required miners to compete to solve complex mathematical problems, using high-tech hardware to validate blocks. When they do it, they produce a random 64-character output, also named hash. Once the block is added to the network, no one can interfere with it to alter or change it.

What does this have anything to do with Bitcoin halving?

When Bitcoin was initially introduced on the market, the miners received 50 BTC for each validated block. The network used the compensation to encourage people to mine new blocks, even before Bitcoin gained the status of the king of crypto. However, the project’s White Paper established from the beginning that the rate at which new Bitcoin is created decreases by half after every 210,000 blocks validated. This usually happens every four years.

Since Bitcoin came into existence, three halving events have taken place (in 2012, 2016, and 2020). After the first halving, the reward dropped from 50 to 25 BTC. Then, the halving in 2016 reduced the incentives to 12.5 BTC per validated block, and the next event dropped the amount even further to 6.25 BTC. After the 2024 halving, miners will receive 3.12 new BTC, and the chain of cutouts will likely continue until 2140, when the last Bitcoin will be mined.

Why did Satoshi Nakamoto create Bitcoin to experience halving’s?

The algorithm used to run the Bitcoin network is programmed to search for new blocks every ten minutes. As new miners join the process, the time decreases and the hashing power increases. But the blockchain was developed to maintain the 10-minute objective so that it will adjust the mining difficulty regularly. The average period to validate a new block has remained around 10 minutes over the last 10 years, even if the pool of miners has increased dramatically.

Satoshi Nakamoto established that there would be only 21 million coins, so the generation of new blocks would end when the supply reached the established amount. Halving events assure that the quantity of mined Bitcoins drops over time to maintain the digital currency’s scarcity and value. The White Paper also settled the fact that the miners’ reward would decrease with each halving because it was expected for Bitcoin’s value to spike in time. Bitcoin halving events are also predicted to drive major price boosts because they limit the coin’s supply.

How should investors speculate on Bitcoin price movements around halving events?

When considering buying Bitcoin, exploring its connection to mining profitability is essential. The price appreciation of BTC has always affected it because Bitcoin has always had modest transaction fees. But now that rewards are dropping, miners will be less interested in validating Bitcoin blocks, and the network will experience a slowing sell-side pressure. In 2022, many miners had to sell their Bitcoins at low prices to pay for energy expenses.

Market specialists still debate whether Bitcoin price correlates to the hashrate. The hashrate is the computational load miners need to validate new blocks. The more difficult it is to produce a hash, the higher the hashrate will be, which will trigger increased competition. However, this could only be beneficial for the network because it boosts its security. At the moment, Bitcoin is considered the most secure cryptocurrency.

It’s impossible to tell what will happen with Bitcoin in 2024, but its price has always been upward after halving events. The reason is that Bitcoin remains the same or becomes more valuable when fewer coins are brought into circulation. Similarly to other commodities, the supply/demand dynamics create a price pressure that impacts its price.

The next halving isn’t good or bad. Miners will still be incentivised to secure the network, and if the cryptocurrency gains more value, their rewards will be more than enough. Bitcoin halving’s are vital to maintaining its scarcity because they slow the distribution of new Bitcoins into circulation. They also encourage miners to search for innovative solutions to increase their efficiency, which could support their profits in the long run.

What does 2023 have in store for Bitcoin?

Since the start of the year, Bitcoin’s value increased by over 70% compared to its December 2022 price. At the same time, it hovers at around $30,000, and investors are curious what will happen as the 2024 halving is approaching. Are you ready to join the crypto market and invest in Bitcoin?

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WARNING: The investment in crypto assets is not regulated, it may not be suitable for retail investors and the total amount invested could be lost

AVISO IMPORTANTE: La inversión en criptoactivos no está regulada, puede no ser adecuada para inversores minoristas y perderse la totalidad del importe invertido