Miners receive Bitcoins, known as block rewards, for verifying and verifying transactions and keeping the blockchain network secure. Miners who receive them can hold, trade, or sell them. This is also how new digital coins will be put into circulation.
Since there are only 21 million bits of Bitcoin in existence, the halving is a technical event written into Bitcoin's code that splits the block reward received by miners in half every four years. In 2009, the miner was given 50 Bitcoins. In 2012 he received 25 Bitcoins, in 2016 he received 12.5 Bitcoins, and in 2020 he received 6.25 Bitcoins.
Here's how the halving could impact both investors and miners.
Although the halving itself does not directly impact the price of Bitcoin, investor expectations for this event can cause highly volatile price fluctuations, says certified financial planner and president of Born Fied Wealth. says Douglas Bonepers. Bone Purse has also held Bitcoin since 2014.
“As halving approaches, speculation typically increases, which can lead to increased volatility in the Bitcoin market,” he said. “Investors may buy into Bitcoin in anticipation of potential price increases, but there is no certainty or guarantee, and frankly, this only increases volatility.”
Furthermore, it is difficult to pinpoint exactly what is causing Bitcoin's price fluctuations and declines. Unlike stocks and bonds, cryptocurrencies do not derive their value from an underlying asset.
While the halving increases scarcity, Bitcoin doesn't exactly follow the typical rules of supply and demand.
“You might think that limited supply always means prices should go up, but that's not true,” Vonepers says. “If that's your theory, then you're not taking into account the myriad of factors that can cause the price of Bitcoin to move in any given day.”
In 2024, the block reward will be reduced to 3.125 Bitcoins. This makes him worth approximately $200,122 as of April 19th at the time of article publication.
However, mining Bitcoin can be an expensive endeavor, as it typically requires expensive hardware and huge amounts of energy. That's why some miners need to weigh the cost against the potential payout, Malekan said.
Although miners can earn revenue from transaction fees, the bulk of their revenue comes from block rewards, which will effectively be cut in half after the halving, he said.
“Like any business, miners need their revenue to exceed their costs,” Malekan says. “What could happen after the halving is that some miners will no longer be profitable and will stop mining.”
If you are interested in investing in Bitcoin, please be careful when delving into the world of cryptocurrencies.
Bitcoin's price briefly hit an all-time high in March, but as with any financial asset, Bitcoin's past performance should not be used to predict future performance.
Additionally, cryptocurrencies are considered to be highly volatile assets with high price fluctuations, so there is no guarantee that you will profit from your investment.
“You're dealing with something very volatile, so you have to be careful when trading Bitcoin in the short term or things can go wrong,” Bonepers said.
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