Bitcoin’s Milestone: Reaching 800,000 blocks with the countdown to the next halving

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  • Next year will mark the fourth occurrence of such a Bitcoin halving event in history
  • The functioning of the Bitcoin network heavily relies on volunteers who operate “mining” nodes
  • To ensure controlled economic planning, Bitcoin’s code is designed to halve the mining reward periodically, effectively slowing down the rate of new Bitcoin supply

The impending halving is rapidly approaching. There is less than a year remaining until the pivotal moment when the block reward for Bitcoin undergoes a halving. This will mark the fourth occurrence of such an event in Bitcoin’s history. Currently, there are approximately 40,000 blocks left until the halving takes place.

Regardless of the speculators’ predictions about the price going up due to this event, it is equally thrilling either way. Witnessing this historical moment unfold is a unique opportunity. It is imperative to remain patient, stay humble, and continue accumulating sats or any other cryptocurrency you prefer. After enduring the crash of 2022, there is hope that all the waiting and efforts will eventually give back.

Based on historical patterns, the actual day of the event often doesn’t bring significant price fluctuations; instead, we tend to observe a period of sideways movement, which is likely to happen this time as well.

What is Bitcoin Halving, and how does it work

For those unfamiliar with the concept of Bitcoin halving, we provide a straightforward analogy. Imagine Bob, who runs the only store in town selling real, organic apples. Every day, he supplies his customers with 50 fresh apples from his farm. However, due to certain changes, he can now only provide 25 apples per day. As a result, his regular customers find themselves competing for the limited supply and are now willing to pay a higher price for these apples compared to before.

Read: Recovery is in sight for the crypto industry in 2023

The functioning of the Bitcoin network heavily relies on volunteers who operate “mining” nodes. These nodes are responsible for maintaining the decentralized Bitcoin network and, in return, receive occasional new bitcoins as a reward, hence the term “mining.” (It’s worth mentioning that miners are essentially competing to solve an evolving math problem, and the one who succeeds receives the new bitcoins, but that detail is not the primary focus here.)

Halving reduces supply

To ensure controlled economic planning, Bitcoin’s code is designed to halve the mining reward periodically, effectively slowing down the rate of new Bitcoin supply. The next halving event is estimated to occur slightly less than a year from now, assuming current mining rates remain steady.

Historically, each previous “halving” has been followed by a new bull run that significantly increases the price of Bitcoin, typically about a year later. In theory, investors are aware of this anticipated reduction in new supply, and the value of Bitcoin should already reflect this knowledge. However, in practice, people seem to be consistently surprised by the increasing scarcity of new BTC, leading to a subsequent price surge.

Another possible explanation is that the “event” garners significant media attention, even in mainstream channels, reigniting people’s curiosity and engagement. This is especially true when articles highlight the historical pattern of price increases following previous occurrences. In a way, it becomes a self-fulfilling prophecy as renewed interest and anticipation contribute to the price movement.

What happens after every Bitcoin halving

With each halving event, the selling pressure from miners is reduced by half compared to the previous halving. Miners typically sell a significant portion of their rewards to cover their energy expenses. For instance, before the last halving, 1800 BTC were mined daily. This reduced to 900 BTC, resulting in a 900 BTC decrease in sell pressure. The next halving will lead to a further reduction, with mining rewards decreasing to 450 BTC per day, cutting the selling pressure by 450 BTC. As each halving occurs, its impact becomes progressively less pronounced, as the reduction in sell pressure becomes halved itself.

Supply and demand principles of economics shape the dynamics of Bitcoin. Its supply caps at 21 million. Over time, some of it will get destroyed or lost, reducing availability. This in turn will drive the prices higher. Furthermore, halving events leads to a decrease in the production of new bitcoin, leading to a limited supply. Therefore, the equilibrium Bitcoin price continues to rise consistently as demand for the cryptocurrency grows. It would be interesting to get your opinion on this historical event.

Read: Decentralized Finance surviving the crypto collapse

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JOSEPH KANGETHE
JOSEPH KANGETHE
I am a tech, business, and investment news reporter covering Africa. Most of what is good in Africa is obscured by preconceptions, yet there is still a lot of good going on. Technology is what is driving the continent and this is my passion. For Africa, I share the stories that are important to Africans.
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