All
eyes
of
the
crypto
community
are
on
the
next
Bitcoin
halving,
scheduled
for
mid-April.
This
event,
which
occurs
roughly
every
four
years,
is
the
fourth
in
the
history
of
Bitcoin
and
means
that
the
miners’
reward,
following
the
approval
of
new
blocks
added
to
the
blockchain,
will
fall
by
half.
This
will
reduce
the
frequency
of
new
BTC
injected
into
the
system,
as
the
total
amount
of
mined
Bitcoin
edges
closer
to
the
maximum
threshold
of
21
million
circulating
units.
The
first
halving
took
place
on
28
November
2012,
after
the
first
210,000
blocks
had
been
drawn.
On
that
occasion,
the
reward
was
reduced
to
25
coins
per
new
block.
After
a
further
210,000
blocks
the
reward
fell
to
12.5
Bitcoins
on
9
July
2016,
and
to
6.25
on
12
May
2020.
With
the
upcoming
halving
it
will
fall
from
6.25
to
3.125
BTC.
This
continues
until
2140,
when
after
the
final
halving,
all
21
million
tokens
will
be
in
circulation.
By
reducing
the
reward
for
creating
new
blocks
on
the
blockchain
–
an
expensive
process
requiring
energy-hungry
computers
–
the
incentive
to
produce
new
Bitcoins
is
theoretically
reduced.
Halving,
therefore,
has
historically
triggered
supply
shocks
that,
in
turn,
have
generated
greater
interest
and
speculation
within
the
crypto
community.
Generally,
halving
seems
to
have
triggered
price
increases
in
the
past.
According
to
research
by
crypto
tax
consultancy
CoinLedger
in
the
six
months
following
the
last
two
halvings,
the
value
of
BTC
increased
by
51%
and
83%
respectively.
Of
course,
the
value
of
Bitcoin
in
those
days
was
far
from
what
it
is
today:
At
the
2016
halving,
one
BTC
was
worth
$650
and
in
2020,
$8,572.
Why
This
Halving
Could
Be
Different
The
current
market
dynamics
in
which
the
halving
will
take
place
are
unique
in
the
history
of
cryptocurrency,
prompting
a
reassessment
of
its
potential
impacts,
according
to
a
study
published
last
week
by
the
research
team
of
21Shares,
the
first
issuer
of
ETPs
on
crypto
in
Europe.
The
researchers
said
that
the
four-year
halving
effect
gradually
diminished
over
time,
with
each
successive
event
leading
to
a
decrease
in
growth
rates
in
the
value
of
Bitcoin.
For
example,
BTC
surged
about
5,500%
in
the
four
years
following
the
first
halving,
by
about
1,250%
in
the
cycle
following
the
second
halving
and
by
roughly
700%
in
the
current
cycle.
This
suggests
an
increasing
maturity
of
the
market.
Also, Bitcoin
is
currently
soaring
close
to
its
all-time
high,
whereas
during
past
halvings
it
has
traded
40%
to
50%
below
prior
highs.
One
wild
card
in
the
current
cycle
has
been
the
launch
of
cryptocurrency
exchange-traded
products.
“BTC
spot
ETFs
demonstrated
staggering
trading
volumes,
signaling
significant
interest
from
traditional
investors
by
reaching
a
new
all-time
high
of
over
$1
billion
of
inflows
in
a
single
day
on
March
13,
2024,”
21Shares
said.
Finally,
the
study’s
authors
claim
that
the
entry
of
institutional
players
is
changing
the
overall
‘habits’
of
Bitcoin
investors,
with
long-term
holders
becoming
increasingly
important
and
the
amount
of
Bitcoin
held
on
exchanges
at
a
five-year
low.
“If
this
trend
were
to
persist,
Bitcoin’s
supply
would
become
increasingly
illiquid,
setting
the
stage
for
a
supply
squeeze
and
consequently
a
potential
sharp
rise
in
price,”
say
the
analysts.
21Shares
is,
unsurprisingly,
striking
an
optimistic
tone
on
Bitcoin.
What
seems
certain,
however,
is
that
current
supply
and
demand
dynamics
are
very
different
from
those
of
the
past.
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