Understanding the Impact of the Fourth Bitcoin Halving
Bloomberg – As we approach fourth Bitcoin halving, it’s crucial to understand its potential impacts on the global economy and the future of cryptocurrency. In less than 200 days, Bitcoin’s fourth halving event is expected to occur. This event, which happens every four years, cuts the supply rate in half. Here’s a simple guide to understanding this event and its potential impacts.
Countdown to the Halving
Currently, there are about 193 days left until the next halving, which is scheduled for April 2024. The Bitcoin halving is a feature programmed into Bitcoin by its creator, Satoshi Nakamoto. It occurs every 210,000 blocks, or about every four years. When the network reaches a specific block number, the reward that miners get for verifying transactions is cut in half.
For example, the original reward was 50 bitcoins per block. After the first halving in 2012, it dropped to 25 bitcoins per block. This system controls the rate of supply, which decreases over time. So far, Bitcoin has had three Halvings.
What Does the Fourth Halving Mean for Miners?
The upcoming halving will reduce the reward from 6.25 BTC to 3.125 BTC per block. This will lower the inflation rate from 1.7% per year to 0.84%. At current prices and with 900 BTC issued daily, miners make about $24 million per day in new bitcoins. If the price of bitcoin remains stable, this daily income would drop to $12 million.
Bitcoin Halving Impact on Miner Profits
Before the 2012 halving, bitcoin’s price rose from under $5 to over $13. This ensured that mining remained profitable despite the reduced block reward. The price also increased before the 2016 halving and again in 2020.
The Future of Bitcoin Mining
FxNews – While prices have increased during past Halvings, it’s not guaranteed to happen again. If bitcoin’s price doesn’t rise around the time of the halving, mining could become unprofitable. This could force many miners to stop operations, reducing the network’s hashrate and security. However, if bitcoin’s value increases enough to offset the reduced block reward, mining can remain profitable. Miners could also benefit from transaction fees if bitcoin’s usage and adoption grow significantly.
After the 2024 halving, miners will receive 3.125 BTC per block. The 2028 halving will reduce this further to just 1.5625 BTC. If each of four billion people made a daily bitcoin transaction with a fee of $0.01, this would total $40 million in daily fees. This could support miners even after block rewards disappear.
Even though the Bitcoin system allows us to predict when halvings will happen and how they will affect the supply of Bitcoin, we can’t predict everything. We can’t know for sure what the price of Bitcoin will be or how mining will be affected at future halvings. Any ideas about how the network will respond to a reduced supply are just theories until the halvings actually happen.
J.J Edwards is a finance expert with 15+ years in forex, hedge funds, trading systems, and market analysis.