Bitcoin just completed its fourth “halving,” here’s what investors need to pay attention to now | Wilnesh News

On Friday night, for the fourth time in the history of the Bitcoin network, rewards awarded to miners were cut in half.

According to the Bitcoin code, this prestigious event takes place approximately every four years and is designed to slow down the issuance of Bitcoin, thereby creating a scarcity effect and allowing the cryptocurrency to maintain its digital gold-like qualities.

There may be some speculative trading involved in the event itself. JPMorgan Chase said it expects some downward movement after Bitcoin’s halving, and Deutsche Bank said it “does not expect a significant price increase.” However, even if Bitcoin continues its trend of diminishing returns from halving day to the top of the cycle, the impact could be greater a few months later. Two key factors to focus on are block rewards and hash rate.

Benchmark’s Mark Palmer said: “While the upcoming Bitcoin halving will cause a supply shock like previous halvings, we believe that the simultaneous demand shock caused by the emergence of spot Bitcoin ETFs may amplify its impact on cryptocurrency prices. Influence.

The larger immediate impact will be on the miners themselves, he added. The machines they run are responsible for recording and adding new blocks of Bitcoin transactions to the global ledger, also known as the blockchain.

“Miners with access to cheap, reliable power sources are well-positioned to handle post-halving market dynamics,” Maxim’s Matthew Galinko said in a report on Friday. “Some miners, many of them private companies, may be affected by the Miners with capital and relatively expensive electricity that exit the market due to poor access to electricity, efficient machinery, and capital may find opportunities in the wake of potential consolidation and disruption.

block reward

Miners have two incentives to mine: a transaction fee that the sender voluntarily pays (for faster settlement) and a mining reward — 3.125 newly created Bitcoins, or about $200,000 as of Friday night, when the mining reward went from 6.25 Bitcoins lost. The initial reward is 50 Bitcoins.

Reductions in block rewards slow down the creation of new coins, thus reducing the supply of Bitcoin, helping to maintain the concept of Bitcoin as digital gold – whose limited supply helps determine its value. According to the Bitcoin code, the number of Bitcoins in circulation will eventually reach 21 million.have About 19.6 million In circulation today.

“Miners use powerful, specialized computer hardware to verify transactions on the Bitcoin network and permanently record them on the blockchain,” said Deutsche Bank analyst Marion Laboure. “This process, called mining, uses new mints to Bitcoin rewards miners, but with each halving, mining rewards are reduced to maintain scarcity and control the cryptocurrency’s inflation rate over time.”