The upcoming Bitcoin halving event in April 2024 is expected to further fuel the bullish sentiment as miners attempt to maximize their revenue before that
Bitcoin mining has not been as profitable as it used to be back in the day. And the primary reason for that is the subsequent Bitcoin halving events that we have seen since its launch in 2008. From its infancy days, the network has evolved greatly as computational power has increased manifold, and many miners have been added to the network. Historical data has shown a new bitcoin block is created once every 10 minutes — with that assumption, we can estimate that block rewards halve once every four years.
To put it simply, Bitcoin halving is an in-built feature that reduces the reward miners receive for solving complex mathematical problems and validating transactions. This process occurs approximately every four years or precisely every 210,000 blocks. It's like the heartbeat of the Bitcoin system, maintaining its health by adjusting the rate at which new Bitcoins are introduced into circulation.
Imagine you are a miner in a vast digital gold mine. Your reward for each successful dig is a shiny Bitcoin. However, here's the twist—the number of new Bitcoins you get for your hard work is halved periodically. This deliberate scarcity mirrors the dynamics of precious metals like gold, where limited supply often contributes to increased value.
The magic lies in the economic principle of supply and demand. As the rate of new Bitcoins entering the market decreases, but the demand remains steady or even grows, the price tends to rise. It's a simple yet powerful equation that has historically fueled significant increases in Bitcoin's value following each halving event.
Let's take a stroll down the crypto history lane. The first Bitcoin halving occurred in 2012, and the impact was nothing short of remarkable. The price of Bitcoin surged, marking the beginning of a trend that would repeat itself in 2016. Each halving event seemed to trigger a domino effect, propelling Bitcoin into the spotlight and attracting more investors. In 2020, the most recent halving took place, and true to form, Bitcoin experienced a surge in value in the months that followed. This historical pattern has led many to view Bitcoin halving as a potential catalyst for bullish trends in the cryptocurrency market.
The hashrate of Bitcoin, indicating the computational power required for coin mining, has reached an unprecedented peak, as reported by crypto platform Blockchain.com. This surge implies that miners are employing increasing levels of power and speed to solve intricate mathematical puzzles, earning them Bitcoins. J.P. Morgan analysts project that the hashrate has continuously set new records for 11 consecutive months, with a notable historic surge observed in October (charted below).
Hashrate is a measure of computational power dedicated to solving complex mathematical problems, crucial for maintaining the security and integrity of a blockchain network. Think of it as the speed at which a gold miner can pan for gold in a river. The faster they can sift through the sediment, the more likely they are to find valuable nuggets. Similarly, in the world of cryptocurrencies, a higher hash rate implies a more powerful and efficient system for validating transactions and securing the network.
In the last month, Bitcoin has experienced a surge of approximately 37%, reaching around $37,000 following a period of relative stagnation. This upward trend has motivated miners to connect their high-powered computers to solve complex puzzles and capitalize on the sale of newly generated coins. Blockchain.com data reveals that the 30-day average of miners' revenue has shown a consistent improvement throughout the year, reaching an 18-month high at $32.46 million on November 11.
Despite these positive developments, the mining process, known for its high energy consumption, is still not as lucrative as it was during its peak in 2021. The earnings metric, measuring miners' revenue for utilizing 1 petahash per second of computing power in a day, has risen from $70 at the beginning of November to over $81. However, this figure remains considerably below the peak of $127 recorded in early May, as reported by mining data platform Hashrate Index.
Taking a stroll down the crypto history lane, the first Bitcoin halving occurred in 2012, and the impact was nothing short of remarkable. The price of Bitcoin surged, marking the beginning of a trend that would repeat itself in 2016. Each halving event seemed to trigger a domino effect, propelling Bitcoin into the spotlight and attracting more investors. In 2020, the most recent halving took place, and true to form, Bitcoin experienced a surge in value in the months that followed. This historical pattern has led many to view Bitcoin halving as a potential catalyst for bullish trends in the cryptocurrency market.
Anticipated for April 2024, the upcoming halving is a deliberate process designed to slow down the issuance of Bitcoin. The cryptocurrency's total supply is capped at 21 million, with 19 million already mined. Mining data from Hashrate Index indicates that the earnings metric for miners, utilizing 1 petahash per second of computing power in a day, has increased to over $81 from $70 at the beginning of November. However, this figure remains notably below the peak of $127 recorded in early May. As the countdown to the impending reward reduction for miners approaches, set to occur in six months, miners are actively seeking strategies to prevent their profit margins from shrinking in the fiercely competitive environment.
Originally published at https://khanfk.substack.com.