Now that the much-hyped event has officially taken place, everyone is looking forward to what this would mean for the premier crypto and the broader market
The Bitcoin halving is a pre-programmed event designed to occur approximately every four years or after every 210,000 blocks mined. During this process, the reward given to miners for validating transactions is halved. Initially set at 50 bitcoins per block in 2009, it was reduced to 25 bitcoins in 2012, then further halved to 12.5 bitcoins in 2016. The most recent halving occurred in 2020, reducing the reward to 6.25 bitcoins per block.
No wonder, crypto investors and miners alike were eagerly waiting for the latest halving event. The long-awaited fourth iteration of the Bitcoin halving took place just after 8:09 p.m. Eastern on April 19. Following the halving, Bitcoin initially traded flat, maintaining stability at around $63,000. However, in the days that followed, BTC surged to reach highs of $67,000.
Historically, Bitcoin halvings have triggered periods of heightened volatility in the cryptocurrency markets. The reduction in the rate of new supply entering circulation often leads to a supply shock, potentially driving up prices as demand remains constant or increases. While this may still hold true, there are a couple of variables to account for this time.
First and foremost is the introduction of game-changing Bitcoin ETFs earlier this year. These trading instruments have already attracted billions in investment. Unsurprisingly, Bitcoin already reached an all-time high of over $73.7k in the wake of this event. Moreover, BTC’s traditional role of digital gold is getting a boost with innovative Layer 2 solutions - adding value further (Figure 1) to Bitcoin’s ecosystem.
Figure 1
Initiatives such as Ordinals and BitVM are reshaping Bitcoin's potential, as the competition to improve Bitcoin's utility and scalability heats up. Despite facing challenges and adopting a conservative upgrade strategy, these projects are striving to expand Bitcoin's utility, potentially altering its position in the blockchain sphere. Although Bitcoin's Layer 2 ecosystem may trail behind others in certain areas, strategic collaborations and efforts to broaden its applications showcase the possibility for Bitcoin to transform into a centralized hub for shared security and innovation.
Here’s an example of how it might not be all doom and gloom for BTC miners. ViaBTC successfully mined the latest halving block, which marked the 840,000th block on the Bitcoin network. It's noteworthy that the successful miner earned slightly over 40 bitcoins, totaling more than $2.6 million in block subsidy and fees, as their reward, according to data from mempool.space. This reward stands in stark contrast to the approximately 7 bitcoins, worth a little more than $450,000, earned in total fees for validating the blocks immediately preceding the halving block.
A significant portion of Bitcoin's recent surge can be attributed to the introduction of spot Bitcoin exchange-traded funds (ETFs), suggesting that demand generated by the broader market could exert a more substantial influence on Bitcoin prices than halving events. Nevertheless, the recent halving appears to have sustained the bullish sentiment. While the immediate impact on price movements may be modest, there are signs that miners could explore avenues for enhanced revenue, even without a price surge as Bitcoin expands its use cases with layer-2 networks.
Originally Published on Substack.
