The Bitcoin market has taken a toll as the price of BTC continues to fall. As of 5th August 2024 the price of bitcoin is at the lower circuit of its present range close to $50000. This comes months later after the bitcoin halving of late April which decreased the bitcoin block reward by half. The bitcoin halving takes place about every four years and reduces the block reward by 50%. This lowers the supply of bitcoins entering the market, which increases scarcity and can act to raise its price if market conditions remain the same.
Block rewards are part of the blockchain's automatic process of validating transactions and opening new blocks called mining. The mining participants called miners who compete in a race to solve a cryptographic puzzle, are given new bitcoins if they are the first to solve it.
Their block is added to the blockchain, they receive a reward, and the network starts another race. All miners confirm the data in the newly added block while trying to solve the puzzle for their own new blocks, hoping for an ever-decreasing reward.
But what does bitcoin halving actually do the market?
Bitcoin mining to put it simply makes it more difficult for miners to get the same amount of bitcoin reward they got previously with the same computational power. To get a steady stream of block reward the miners have to increase processing power by adding more mining devices. This increases both the fixed cost of mining i.e ASICS , GPU's, CPU devices as well as electricity cost that are variable based on the number of devices in use. Miners logically tend to hold onto their bitcoin reward after halving until prices increase so as to sell bitcoin at a profit to cover cost. As a result a bullish momentum is created as more and more miners begin to hold onto their bitcoin. The speculators might buy and sell and provide liquidity to the market however miners being the core participants in the success of the bitcoin ecosystem tend to hold on to their bitcoin until prices are high enough to make a profit as well as cover cost of expansion and electricity.
History of Halving and how they affected the price overall.
As one can see in the chart above as a consequence of each halving, miners held onto their bitcoin reward and caused scarcity in the markets. This scarcity in supply made bitcoin price catch momentum and made the price increase over the months following the halving. Though the overall volatility i.e extreme see saw effect in price has calmed down with the maturity of bitcoin and cryptocurrency markets. The fact remains that the bitcoin halving is a bullish signal. Bitcoin has touched its resistance turned support of $50000 and should be range bound if not bullish.
I expect the price of Bitcoin to cross $100K in 2025 based on the fact that Bitcoin ETF'S in both the U.S and Hong Kong have been approved by their respective governments allowing even more institutional investors to open liquidity channels into the market. Bitcoin ETFs are exchange-traded
funds that track the value of Bitcoin and trade on traditional market
exchanges rather than cryptocurrency exchanges. Bitcoin has never been more bullish.
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