Given the significant to astronomical rewards that the past Bitcoin halvings have brought about to patient BTC holders waiting until the perfect moment to cash in came, there’s a lot of hype and noise around the upcoming mining reward reduction. Scheduled for April of this year and having investors from all walks of life either pouring money or sleeping on the idea until they’re buying it at a higher price, it’s only normal that those with little to no familiarization with the asset and crypto world to be dumbfounded and intrigued. Bitcoin is a complex yet enticing cryptocurrency that enables anyone to diversify their investment portfolio through easy methods of acquiring and storing it. One can buy Bitcoin p2p, with bank transfers or through a suitable app allowing such transactions anytime they feel like they’ve gained enough insight into the industry.
Momentarily, it’s safe to say that there’s a shown tendency to speed it up and rush to add the reigning cryptocurrency to the holdings without having consistent acumen about it. For some, it’s enough to hear that the past halvings have brought about bull runs in less or more time to look to accumulate it or even get the knack.
What few may know, however, is that this new wave of reward downsizing is bound to be a little different than the previous ones and possibly take many investors by surprise with a different outcome than expected. So, where should anticipations lie, whatsoever?
A quick recap of the essentials of the BTC halving
The fourth halving is approaching, and despite the buzz created around the asset, it’s common for many to not exactly know what to expect and where the hype comes from. This upcoming halving is said to transpire delicious surprises, but what does it exactly mean?
This year’s halving marks the diminishment of the reward received by miners for creating blocks from 6.25 BTC to 3.125 BTC for each block. These subsidy slashes take place every approximately four years, or when 210,000 blocks are reached, thanks to Satoshi Nakamoto’s vision of crafting a disinflationary crypto. Thus, Bitcoin will be gradually inching to its ultimate capped supply on the market, being expected to reach 21 million Bitcoins around 2140.
When the last Bitcoin gets mined isn’t set in stone. In fact, it’s deemed impossible for the number of Bitcoins in existence to actually reach the 21 million thresholds because many coins get lost out there, such as those stored on hardware that gets unintentionally dumped and end up at landfills. However, the capped supply of 21 million coins remains an elemental feature of the primary asset, and the foreseeability of supply and inflation rate stand at the core of what has gathered enormous demand and trust in the asset as an outstanding and better type of currency.
The halvings represent some of the essential transitions of Bitcoin rewards over time, marking the shift from block creators gaining income from freshly released coins from the supply to making money from the transaction fee earnings derived from participants relocating Bitcoin on-chain.
As Satoshi Nakamoto, the intriguing alleged Bitcoin creator, stated in the whitepaper, incentives can also be derived from transaction fees, representing the targeted phase where Bitcoin is designed to arrive.
What history has taught us about the halvings so far
Historically speaking, each of the three halvings was associated with huge increases in the asset’s price and a spike in the valuation of several other cryptocurrencies. As a rule of thumb, when Bitcoin does well, most digital coins are performing decently, too. The upsurges offset the effect of the incentives’ halving. Miners’ bills get settled in fiat money, which means that a potential upsurge in BTC’s price, leading to more revenue in dollar terms for the least BTC gotten for every new block added could translate to the potential of a buffered negative effect on the mining process.
Given the previous market cycle where an expected fourfold growth from the last ATH wasn’t met, it’s rushed to make assumptions on how much a valuation spike could protect miners from the halvings’ impact. The upcoming event will coincide with the first time the BTC inflation rate falls below 1%. Speculations and expectations are that the forthcoming market cycle will bring about the same positive results as the previous halvings. Still, it’s safe to say that being reticent regarding colossal price growth and investment fruition is understood. The halving could not favor miners if BTC doesn’t witness higher upward movements.
Notably, what miners can gain from the transactions in the form of fee revenue becomes more critical than ever, continuing to rise in significance as a core element deciding the faith of their business from an entrepreneurial perspective. Fee revenue shall increase, or the price must double every time a halving occurs so miners can stay afloat regarding their profits.
The new element in the equation
There’s a newcomer in the equation, and this is the ordinal. Ordinals are fresh incentives that weren’t present in previous halvings but have just broken into the market. Put simply, they can be perceived as scarce satoshis.
The upcoming halving marks the first one to occur since a subcategory of BTC owners have embraced the new assets. The world has yet to witness the issuance of a basic sat simultaneously with already-formed material market demand regarding it, coming from a broad and matured ecosystem. The sat in question, interacting with its market demand, could end up seeing its price rise astonishingly high.
Drawing a line, the market demand and price swifts could trigger a battle between miners for a reorder of the blockchain as soon as the halving’s finished. Only at this singular time does the reward distributed for the network’s readjustment disregard the consensus rules. The point of debate could be represented by the denomination of the entity that can mine an entirely valid block, driven by the significance that collectors could assign to the specific coin base.
No guarantees exist to back up such theory or sustain that a reorganization will happen, but a highly appealing incentive for miners involved in such activities could exist.
Each halving ever witnessed has brought about different outcomes and rewards. This go around, however, is poised to be a lot more captivating than those previously experienced, so keep tabs on it!
