Bitcoin halving is an event that represents a halving of the reward for miners received for creating a new block in the Bitcoin blockchain. This happens when a certain number of mined blocks is reached, more precisely every 210,000 blocks. This number of blocks is mined in approximately 4 years. Halving was created as a mechanism to control inflation in the Bitcoin system and affects the total currency offered in circulation.
When Bitcoin launched in 2009, the mining reward was set at 50 bitcoins per block. At the first halving in 2012, it decreased to 25 BTS, and at the second halving in 2016, it decreased to 12.5 coins. The last halving occurred in May 2020, and the reward is now 6.25 bitcoins per block. The next significant event is expected in May 2024 and the reward will decrease to 3.125 BTС.
How does halving affect the price of BTС?
Halving is important for the Bitcoin economy. Decreasing mining rewards reduces the total number of new bitcoins entering circulation, which in turn affects supply. Many believe that this could also affect the price of BTС, as a decrease in the supply of new coins could create scarce demand, especially with growing interest in cryptocurrencies.
Historically, after each halving, BTС rose in price and updated its historical price maximum. During 2012-2013, the price of the coin increased by more than 9500%, in 2016-2017 – by a little more than 3000%, and in 2020-21 – by “only” 652%. That is, the price increase in each cycle progressively decreases, although in absolute numbers the coin becomes more expensive over and over again. Changes in the ETH/BTС rate do not occur synchronously with halvings. The historical maximum of about 0.119 ETH per BTC was recorded back in 2017.
Based on historical data, the crypto community is preparing for the next cycle of BTС price increases.
How halving will affect altcoins
Altcoins are commonly referred to as all other cryptocurrencies. As a rule, after halving there is an active growth of the market as a whole and many altcoins rise sharply in price, repeating the price patterns of the flagship. However, depending on the general market sentiment and current market information and other factors, the real scenario may turn out to be not only positive, but also negative.
- Optimistic scenario. A Bitcoin halving has the potential to increase the value of altcoins if investors and traders associate the event with favorable sentiment towards cryptocurrencies in general. This means that if there are positive trends in Bitcoin trading, they could spread to altcoins, ultimately causing more favorable price movements.
- Pessimistic scenario. If the fluctuations during the halving are too sharp and unstable, this may make investors more cautious and prefer to trade other cryptocurrencies. At the same time, when Bitcoin trades are favorable, the focus may be solely on Bitcoin, which could negatively impact altcoins.
How to prepare for halving
- Watch the market carefully. Even though the halving will occur next year, the cryptocurrency market remains highly volatile and subject to change. Therefore, it is important to keep up to date with cryptocurrency news, subscribe to newsletters and join relevant online communities. So, staying aware of any updates or changes that may affect the event will allow you to make informed decisions.
- Review historical data. Consider price patterns and Bitcoin market behavior before and after previous halvings. While historical data does not guarantee future results, it can provide valuable information about potential trends and market sentiment. Looking for patterns, correlations, and other relevant indicators can help you make informed predictions.
- Diversify your portfolio. Consider diversifying your cryptocurrency portfolio to reduce risk. Although BTS is entering a period of high volatility, other assets may behave differently during this time. Reallocating a portion of your investment to other cryptocurrencies can help mitigate potential losses and pursue alternative investment opportunities. Adjusting the portfolio composition and swap MATIC/RX is not difficult at all if you use the services of LetsExchange.
- Any swap is completed in a few clicks.
- Set clear goals and strategies. Determining your risk tolerance and desired outcomes, and setting clear entry and exit points, will help you make informed decisions. The thing to remember is to “invest only money you are willing to lose.”
- Monitor market sentiment. People’s sentiment influences the market, and analyzing social media conversations and looking for market indicators can help gauge overall sentiment. This information will help you better understand market expectations and make informed decisions.
- Prepare for increased market volatility. Emotionally and financially preparing for potential market fluctuations is essential. Consider adjusting your trading or investment strategy according to circumstances and avoid making impulsive decisions based on short-term price changes.
- Consult the experts. If you are a beginner, it is always recommended to get professional help before you start investing. Finding financial advisors or experts with experience in the cryptocurrency market will help you make informed decisions based on their knowledge and experience.
