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Introduction
Bitcoin halving is what happens when the reward for mining Bitcoin is reduced by 50% for every 210,000 blocks. That is roughly every four years.
The reduction aims to control the rate of Bitcoin supply and prevent inflation.
The next halving is expected to occur in 2024, which is just around the corner.
As a crypto investor, or someone who wants to learn crypto trading, you might wonder:
- How will the 2024 Bitcoin Halving affect investment portfolios?
- What can investors do to prepare for it?
This article breaks it all down for you.
What is Bitcoin Halving?
Bitcoin halving is also known as “the halvening.” It’s an event that results in the reward for mining a block of transactions cut in half. When this happens, miners receive 50% fewer bitcoins for their effort. This means the supply of new Bitcoins entering circulation drops significantly. But inflation decreases as a result.
The last Bitcoin halving occurred in May 2020. It took place after 630,000 blocks were mined.
Why is it important to prepare for it?
Because the halving reduces the supply of new Bitcoins entering circulation. It, therefore, has a significant impact on the price.
It should be remembered – there will only ever be 21 million Bitcoins mined.
With a smaller reward comes less mining activity, which reduces the number of new Bitcoins entering circulation. This can cause the supply to shrink. Prices then potentially spike up as demand outstrips supply.
No one can predict what exactly will happen during/after the halving. Yet there are some signs investors can look out for.
For example, the months leading up to it could see increased buying activity. Miners and other holders start anticipating the scarcity of new coins. As such, buyers could start bidding prices up in anticipation. This then indicates a bullish market ahead. This is always something investors need to be ready for.
(You can find a lot more information on this when enrolling on a cryptocurrency course).
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Historical Overview of Previous Halvings
Bitcoin’s previous halvings have had significant impacts on the cryptocurrency market.
- The first halving in 2012 saw a sharp increase in Bitcoin’s price
- The second halving in 2016 had even more profound effects on price
- The 2020 halving was a little different as the covid pandemic had its own adverse effect
The main point to remember is that as the supply of Bitcoin becomes scarcer, its value tends to rise. Therefore, the halving event is an incredibly important event. But not only for investors. Miners and traders are equally affected.
Understanding the Impact of Halving on Bitcoin Price
In the 2012 halving, Bitcoin’s price surged from $12 to $1,038 within a year.
Similarly, in the 2016 halving, Bitcoin’s price increased from $650 to $20,000 within two years.
These events demonstrate the potential market volatility that may accompany the upcoming halving.
Market Analysis and Trend Prediction
It is difficult to predict the exact effects of the upcoming halving on Bitcoin’s price. However, some analysts believe that the event may cause a short-term price drop. Followed by a long-term price surge.
Bitcoin might also go mainstream as a widely accepted currency by 2024. The halving, therefore, could carry even more significance.
It’s also worth noting that some experts are saying the bitcoin price could hit $100,000 per coin by 2025. But then prices will tumble again around 83%. Which is what happened in the past.
However, 83% of $100,000 is considerably more than 83% of $19,800!
Bitcoin’s Scarcity and Value
Bitcoin’s scarcity and value are closely related. As the supply of Bitcoin decreases, its value tends to increase. The halving is a crucial moment for investors seeking long-term gains in the crypto market.
Preparing for Potential Market Volatility
The upcoming halving event may cause market volatility. This can be challenging to predict. It is therefore crucial to adjust your investment strategy accordingly.
Analysis of the Percentage Increase in the BTC Price During Past Bitcoin Halvings
2012-2016
The value of Bitcoin was approximately $12 in 2012. However, it surged dramatically to over $1,200 after the first halving. That’s an astonishing 10,000% increase.
2016-2020
Bitcoin was stuck at around $650 for a long time. However, after the halving, it soared to almost $19,000. That’s still a whopping 2,900% increase.
2020-2024
The most recent halving took the Bitcoin price rise to 750%. Not as dramatic as previous halvings. Yet having started at around $9,000, it surged to nearly $70,000. Which is still huge!
If this trend continues, the price increase after the 2024 halving could be around 200%.
(Though it is important to note this an estimate only and should not be taken as guaranteed).
Investing Strategies for Preparing for Halving
To prepare for the Bitcoin halving in 2024, there are several things you can do:
Research and Education
Before investing in Bitcoin, it is essential to understand cryptocurrency’s underlying technology. Plus the potential risks and rewards. A better understanding will help you make informed investment decisions.
A good way to get an introduction to crypto education is by subscribing to a reputable crypto trading course.
Diversifying Your Investment Portfolio
Diversification is a key strategy in investing. By spreading your investments across multiple assets, you can minimise your overall risk. Therefore, diversifying your investment portfolio with a variety of cryptocurrencies and other assets is a great strategy.
Consider Long-Term Investment Strategies
The Bitcoin halving event may cause short-term market volatility. However, it is essential to focus on long-term investment strategies. A long-term approach helps you stay invested during market fluctuations. It helps reap the rewards of Bitcoin’s value appreciation over time.
You should also pay attention to your exit strategies when the halving takes place. Some may want to ride out any potential price surge. But it’s important to keep an eye on how long it lasts before cashing out any profits.
Mining and Network Effects
Mining and Staking can be an excellent way to profit from the Bitcoin network.
Mining enables you to earn Bitcoin by verifying transactions on the blockchain.
Staking allows you to earn interest on your crypto holdings.
Potential Risks and Challenges
The halving can bring positive benefits for investors, traders and miners alike. But it also presents certain risks and challenges.
As such, you should approach any trading decisions made during this time with caution. And definitely do your research before investing.
The potential for decreased mining rewards may lead miners to switch off their machines. They might also move over to more profitable coins.
This could cause further issues with price volatility. Fewer miners means less competition. That results in lower transaction fees. Consequently, people may be more likely to start investing in other altcoins.
There is also the possibility that the halving may not have the desired effect on prices. This could be down to:
- Market sentiment
- Regulatory uncertainty, or
- Competing altcoins taking market share away from Bitcoin
It is imperative you stay up to date with the latest crypto news and events. You can be ready for any potential outcome.
Conclusion
Bitcoin halving time is hugely important for crypto investors. It should also be something those who want to learn cryptocurrency take seriously.
You can prepare yourself by:
- Researching and educating yourself on Bitcoin
- Diversifying your investment portfolio
- Consider long-term investment strategies
- Prepare for potential market volatility
As always, it is essential to keep a long-term perspective. Staying informed on the latest developments in the cryptocurrency market is a must-do.
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