The present cryptocurrency market is undoubtedly bearish, leading many casual investors to be sceptical about investing in Bitcoin.

But those who understand how Bitcoin is designed are looking forward to a potential surge in Bitcoin value in 2024, which is when an event known as “Bitcoin halving” is slated to occur. It would be the fourth Bitcoin halving since the cryptocurrency’s inception in 2009.

What is Bitcoin halving, and how does it impact Bitcoin’s value? Here’s everything investors should know about the upcoming halving.

What is Bitcoin halving?

Bitcoin halving is a mechanism built into the cryptocurrency’s code by its creator, Satoshi Nakamoto.

To understand how it works, first, remember that Bitcoin transactions are validated by a decentralised network of users known as miners. Miners compete to be the first to verify groups of transactions or blocks. Only after this rigorous computing process can these new blocks be added to the Bitcoin blockchain.

As a reward, miners who successfully validate blocks earn a certain number of Bitcoin tokens — currently 6.25 BTC. So for every new block, 6.25 BTC are released into the overall circulating supply of Bitcoin.

However, Bitcoin is designed such that the reward is halved after every 210,000 blocks. So, come the next Bitcoin halving, the reward will go down to 3.125 BTC. This tightens the supply of new Bitcoin on the market.

Also Read: Can Bitcoin help us in the fight against climate change?

This tightening mechanism essentially makes new Bitcoin increasingly scarce, thus preserving or even heightening its value.

In contrast, the fiat money supply is practically ever-increasing, which leads to inflation. Furthermore, the fiat supply is controlled by governments and lacks the transparency and pre-programmed regularity of Bitcoin halving.

What happens to Bitcoin during halving?

Because Bitcoin halving has happened thrice in the past, we can anticipate what would happen to Bitcoin’s value before, during, and after the event.

Below is a short history of previous Bitcoin halvings:

• November 2012: This was the first Bitcoin halving, during which mining reward went from 50 BTC to 25 BTC per block. In anticipation of this event, many investors bought into Bitcoin, so from about November 2011 to November 2012, the price of Bitcoin went up by over 340 per cent. After Bitcoin halved, the price of Bitcoin continued to soar for the following year. BTC peaked around 1 year after halving, in November 2013, when its price had surged to nearly +8,000 per cent of the original price.
• July 2016: The second halving was in July 2016. Again, an upwards trend had formed ahead of the event — about nine months prior — leading BTC’s price to increase by +112 per cent. Bitcoin enjoyed a bull run after the mining reward was halved. This time, the bull run lasted 18 months, at which point BTC peaked at about +2,800 per cent, its price at a halving point.
• May 2020: The third and most recent halving was in May 2020. Again, Bitcoin’s price began to climb in the lead-up to the event, starting slightly over a year before. BTC then soared dramatically from US$8,800 to US$69,000, or about +784 per cent, in the 18 months following the halving event.

What can we expect for the next Bitcoin halving?

The next Bitcoin halving was originally slated to occur in May 2024, but because mining activity has surged recently, it is now expected to take place in March 2024.

If data from the three previous Bitcoin halvings is anything to go by, we can anticipate a market rally before, during, and after the event.

• Before halving: We would expect increased investor interest in the lead-up to Bitcoin halving. According to an analysis by crypto service provider Matrixport, BTC starts rallying about 15 months before halving, on average. (If that’s the case, BTC’s price will decrease in December 2022 or January 2023.)
• During halving: Matrixport expects BTC to rally to US$63,000 by March 2024, the date of the expected fourth Bitcoin halving. However, the halving event tends to brighten, bringing about some volatility, according to Forbes.
• After halving: After the initial volatility, the period after Bitcoin halvings has historically offered even more dramatic surges in prices. Typically, Bitcoin enjoyed bull runs of about 12 to 18 months before hitting its new peak.

Investors should bear in mind, of course, that past performance cannot always reliably predict future price movements.

What happens after the last Bitcoin halving?

Bitcoin halving will not happen forever. Once Bitcoin hits the fixed supply cap of 21 million BTC, there will be no further new BTC released as rewards for miners, and therefore no further need for halving.

The last halving is expected to occur in 2140, which is when all 21 million BTC should have been created and be in circulation.

Does this spell the death of Bitcoin as a financial system? No. After the last halving, miners will be paid transaction fees in lieu of BTC. This ensures the long-term sustainability of the cryptocurrency.

Why invest in Bitcoin with a licenced fund manager?

The upcoming halving event has stimulated renewed interest in Bitcoin, the grandfather of cryptocurrencies.

Also Read: 13 years on since the birth of Bitcoin, it’s now blockchain’s time to shine

It’s a powerful reminder that Bitcoin was ingeniously designed with safeguards against inflation and in-built supply control mechanisms. There can only ever be 21 million BTC. This makes Bitcoin compelling as a store of value, hence the appeal for many long-term investors, including companies like MicroStrategy.

However, professional investors must proceed with care to avoid risky crypto exchanges and platforms, especially after recent events.

Fintonia’s Bitcoin Physical Fund is an institutional-grade fund managed by Fintonia Group. The purpose of the fund is to allow accredited investors to participate in this growing asset class in a safe and frictionless way with best-in-class security and regulatory practises in place.

Fintonia Group is a Singapore-based fund manager licenced by the Monetary Authority of Singapore with a provisional licence in the Virtual Assets Regulatory Authority in Dubai. We comply with strict standards and regulations regarding client funds and with proper due diligence conducted on the management team to ensure adequate experience and qualifications in terms of risk management.

Fintonia Group works with insured and licenced third-party custodians with state-of-the-art security measures where Bitcoins are stored in cold wallets. The client’s funds are segregated and not co-mingled with Fintonia funds, as required by regulations.

Speak to us for more information on our Bitcoin Physical Fund and gain insights into the best time to buy into Bitcoin.

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