Bitcoin is currently expecting to go another halving in April, but what does this actually mean, and what should you expect? Let’s have a look.
Bitcoin halving to prevent inflation
First things first, we have to understand what actually is bitcoin halving. Bitcoin halving is a scheduled event where the rate of new bitcoins are released to the market is slashed to half.
The reason for this is that it is a part of a mechanism to prevent the inflationary impact when the total supply of Bitcoin is eventually released. Currently, the total bitcoin cap is set at 21 million. This is an absolute limit and no additional amount can be added after it is all mined.
The halving also prevents bitcoin to exhaust its total supply too quickly, as the current estimation is set at the last coin to be mined around the year 2140.
Halving also means that the rewards for miners who validate their transactions on the blockchain will see their bitcoin reward cut in half, from 6.25 to 3.125 Bitcoins per block.
A press release from Luno explained that while the third bitcoin halving took place in May 2020 and two previous halvings preceded dramatic price increases, the current cycle might look different from previous cycle, due to bitcoin’s recent rally to a record high.
Scarlett Chai, Luno’s country manager for Malaysia, explains,
“While previous halvings have historically shown a price rally within a year after the halving, there are no guarantees that the upcoming halving would carry the same momentum as before,.
“This cycle already looks very different to previous cycles, with Bitcoin reaching all-time highs near the halving for the first time in its history,” says Chai.
What to expect as a Bitcoin holder
If you’re a bitcoin holder, the halving doesn’t really mean anything regarding the Bitcoin you already own. The only impact will be felt by miners, who will half to expend more resources to see the same amount of returns.
At the time of the first halving in 2012, there were only 43,000 bitcoin addresses. By the second halving in 2016, there were around seven million and today there are more than 46 million bitcoin addresses with more than USD1 in them.
The overall supply will also not change due to the halving, as the total supply of bitcoin is always rising until it hits the cap. The halving is only a measure to keep miners from flooding the market.
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