Bitcoin Halving: Cryptocurrency traders await an event that takes place every four years

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We are approaching the “halving” that occurs every four years.

Although this may sound like some kind of pagan ritual or the title of a horror movie, it is actually a beautiful mechanical process that was coded into the design of Bitcoin.

Simply put, halving is an automatic 50% reduction in the number of Bitcoins entering circulation. This should, in theory, push the value of the cryptocurrency higher while keeping inflation under control.

The halving is the World Cup for crypto believers. It happens every four years, and emotions run high.

“Guessing the endgame for Bitcoin after each halving is the ultimate sport,” Anthony Trenchev, co-founder of cryptocurrency lender Nexo, said in a statement. “If the previous halving is anything to go by, it will take no more than eight months for Bitcoin to double in value.”

This is a decidedly bullish view, but it is not an uncommon view among Bitcoin believers.

Bitcoin, the world's first and largest digital currency, Hit a record of $73,750 in March, driven partly by investors eyeing the halving, and partly by US regulatory approval of several bitcoin-based exchange-traded funds, or ETFs.

These financial instruments have given mainstream investors exposure to bitcoin's movements without some of the risks of actually owning the digital currency, and have led to a multibillion-dollar rush into bitcoin, which has risen 40% this year.

The timing of the halving is not precise, as it depends on the rate at which Bitcoin tokens are traded through a technical computing process known as mining.

Most estimates have the halving occurring on Friday night, April 19, for those in the eastern United States, or on the morning of Saturday, April 20, for those in the Asia-Pacific region.

“Historically every halving has resulted in some sort of upward price movement,” Gareth Rhodes, managing director of research and advisory firm Pacific Street, said in an interview. Earlier this year. “This makes sense, because you would expect with more supply constraints prices would go up.”

In 2020, the “reward” for Bitcoin miners increased from 12.5 BTC to 6.25. Now, it will drop from 6.25 to 3.125. Miners are essentially validators on the Bitcoin blockchain, using powerful supercomputers to validate transactions and get paid for their work in Bitcoin.

Of course, there are plenty of crypto skeptics who warn that digital assets have yet to prove their real-world use case, and are at best risky investments.

“It is not clear how far price movements have been in the past it causes By halving, versus simply Interconnected With her,” Molly White, a software engineer and prominent cryptocurrency critic, noted in her newsletter Need a source. “It is worth noting that the previous halving in May 2020 coincided with massive macroeconomic changes in the early months of the Covid-19 pandemic, which led to a flow of funds into riskier asset classes across the board, and also brought a wave of bored day traders due to… Pandemic to crypto.”

Echoing this word of caution, John Sidonoff, a finance professor at Villanova University, wrote that there is no guarantee that Bitcoin's past performance will repeat itself, “particularly in light of the macro environment and the potential for higher mining costs.”

By design, there will never be more than 21 million Bitcoins. This creates scarcity that proponents say creates value. Skeptics tend to say that such artificial scarcity creates no real intrinsic value. (Perhaps the most prominent in this camp is Jamie Dimon, Chairman of JPMorgan Chase, who… Bitcoin has been ridiculed for a long time As a worthless investment.)

While long-term sentiment around Bitcoin is bullish among cryptocurrency believers, the psychology surrounding an event like a halving is difficult to predict and can create extreme volatility even by cryptocurrency standards.

Greg Baird, CEO of Stronghold Digital Mining, said in a statement ahead of the halving that while there was some exaggerated enthusiasm around the event, Bitcoin's recent spikes are “much more than a fad.”

“Bitcoin is maturing with institutional adoption,” Baird said. “It would not be surprising to see the price of Bitcoin rise significantly over the next two years.”