Bitcoin (BTC) is approaching a key event – the long-awaited halving. As a result, the reward for mining a block in the network of the first cryptocurrency will be halved.
Bitcoin halving is a significant milestone that historically impacts the value of BTC and the dynamics of the broader cryptocurrency market.
The market faces a shortage, but demand is only growing
The mining speed decreases by half approximately every four years. Halving is part of Bitcoin's unique monetary policy, which mimics scarcity and preservation of value, similar to precious metals such as gold.
When the rate of creation of new coins decreases, the overall flow of bitcoins into the market decreases. This, in turn, increases competition for existing tokens and creates a supply shortage. The latter traditionally leads to an increase in optimistic sentiment among investors who are beginning to perceive cryptocurrency as a more valuable asset.
Given the growing interest in Bitcoin from institutional investors – through BTC spot ETFs – this trend could take over the crypto market even more.
Other things hint at wider acceptance and normalization of Bitcoin as an underlying financial asset. Countries such as El Salvador have already begun to diversify some of their treasury holdings into BTC. State participation, as STORM analysts note, may also increase pressure on demand after the halving.
Steady increase in Bitcoin price after halving
Mass purchases of Bitcoin can stabilize the price fluctuations of the cryptocurrency, Ahmed believes. In his opinion, after halving there will be no sharp jumps up or down. In contrast, the value of BTC will remain relatively constant but will continually increase.
In anticipation of the mining speed halving, many members of the crypto community are predicting the movement of the Bitcoin price and trading strategies after the halving. At the same time, the time before a historical event is another reason for reflection regarding the technological and regulatory progress of Bitcoin.
Many jurisdictions are now already developing legal frameworks for Bitcoin rather than other speculative crypto assets. This creates the preconditions for wider acceptance of the first cryptocurrency and its introduction into mainstream financial systems.
For this reason, there is a growing consensus in the industry that BTC should be reclassified. Supporters of this initiative believe that Bitcoin should not be “just a cryptocurrency.”
Looking ahead, the cap on Bitcoin's total supply raises fascinating questions for the market about what will happen when miners mine the last coin. The issue of the first cryptocurrency is limited to 21 million tokens, of which 19.7 million have already been mined.
Source: Cryptocurrency
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