Bitcoin (BTC) is a fully decentralized cryptocurrency that uses PoW (Proof-of-Work) mining.
PoW is a consensus mechanism that is used to validate BTC transactions, secure the network, and create new blocks.
BTC miners compete among themselves with the objective of obtaining rewards that are paid with the new BTC created (the maximum total supply that BTC will reach is 21 million coins).
Approximately every 4 years the Bitcoin Halving occurs. The Halving is an event that consists of reducing the reward for mining new BTC blocks (50% reduction).
Previous reductions:
Year Reward per mined block
2012: from 50 BTC to 25 BTC.
2016: from 25 BTC to 12.50 BTC.
2020: from 12.50 BTC to 6.25 BTC.
In April 2024, the Fourth BTC Halving will occur. On this occasion the reward per mined BTC block will be reduced from 6.25 BTC to 3.125 BTC.
Reducing rewards controls inflation by decreasing the amount of BTC entering circulation. In these circumstances, BTC becomes scarcer, which has a direct impact on the supply of BTC available in the crypto market.
The Halving causes scarcity, which can stimulate the increase in the price of BTC in the long term (at least that is what has happened in previous events).
The previous Halvings, by influencing the decrease in the supply of BTC, caused upward impulses in the market price.
However, the real impact of Halving on the price of BTC is not guaranteed (as expressed by a basic investment principle: past returns do not guarantee future returns).
It is extremely important to remember DYOR (Do Your Own Research) before making any investment decision.
Disclaimer: The content of this article cannot be considered as investment advice or financial advice. This post is for informational purposes only.
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