Bitcoin Halving: The Ultimate Bull Market Trigger?
Hamster Racing, MeMe Coins, Friend.tech, DeFi Summer, Ordinals, Blur, Free NFTs,…web3 users have been jumping from trend to trend in the hope to be in what will trigger the next bull run!
And every single time it fell back like a soufflé.
In the face of the crypto space’s never-ending discomfiture, mainly operated by its own actors since 2022, the all-out US legal crackdowns on the space, as well as a worldwide movement of building a strict crypto legal landscape, and a suffocating inflation that strangles little retail investors who made up the bulk of new players in the space since 2020, (among many other things), Web3 users have been looking desperately left and right about what is going to get the space out of the bear market.
For weeks, months, now, though many have raised their voices to say that there is no need to run yourself financially and mentally ragged during this bear market, one only has to wait, and many are listening.
They say that you little retail investor who is down by 90%, you do no need to run around like a headless chicken, you just have to sit tight, hold your losing bags, take a deep breath and wait for the Bitcoin Halving.
Heralded as the crypto space savior, widely hopeful theories are made about it.
The discussion are not about the “if” the next Bitcoin Halving will bring in a new bull run.
No, there is no “if.”
It’s only a matter of when and how far the Bitcoin price will shoot to the stars when it happens
The sharkiest, and maybe the most honest, comments already gloat about how the halving will bring in a new wave of clueless people whom they will use as exit liquidity in a quite unsavoury passing of the baton.
In today’s article, we will discuss what Bitcoin halving is and what hidden power it holds that a whole community believes it can single-handedly overturn the bear market
What is Bitcoin Halving
The Bitcoin halving process is not a one time event, but a recurrent process, whose next happening should take place around April 2024.
It exists due to one of the most unique features of Bitcoin, its limited supply.
In its conception, Bitcoin was deeply tainted by an unconventional economic concept suggesting that the global economy’s predicament stems from its detachment from the gold standard, allowing central banks unrestricted money issuance.
As a response, Bitcoin was formulated to emulate gold by embodying a finite supply.
This entails a reduction in the pace of generating new bitcoins through “mining” every four years, with the eventual cessation of this issuance.
There will only ever be 21 million Bitcoins in existence.
This scarcity is built into the protocol to mimic the scarcity of precious resources like gold.
The controlled issuance of new Bitcoins is achieved through “mining.”
Mining involves solving complex mathematical puzzles to validate and add new transactions to the blockchain. As a reward for their efforts and the computational power they contribute, miners receive newly minted Bitcoins along with transaction fees paid by users.
This reward is known as the “block reward.”
To maintain the scarcity and gradually distribute new Bitcoins, the Bitcoin network undergoes a significant event called “halving.”
This event occurs approximately every four years.
Specifically, every 210,000 blocks.
During halving, the block reward that miners receive for solving puzzles and adding blocks to the blockchain is cut in half.
This reduction in block rewards leads to a slower rate of new Bitcoin creation.
The Myth of the Halving Abondance
The Origins
As just said, the primary purpose of halving is to control the rate at which new Bitcoins are introduced into circulation, ultimately leading to the 21 million coin supply cap.
By halving the block rewards, the rate of issuance decreases over time.
This has several effects that are for the “Halving is King” believers, the making of a Bullrun trigger.
Halving events have a significant impact on miner economics.
Miners’ revenues decrease after halving, which may lead to some miners shutting down operations if the cost of mining exceeds their earnings, leading mechanically to a slower rate of new Bitcoin creation.
As the supply of new Bitcoins diminishes, the scarcity of the cryptocurrency increases.
Where traditional fiat currencies can be subject to inflation due to central bank policies, Bitcoin’s halving mechanism ensures a predictable and decreasing inflation rate, making it, in theory, more resistant to inflationary pressures.
With time, a myth was born around the Bitcoin Halvings.
That the price of bitcoin will achieve ATH between 12 to 18 months after it.
The halving is seen as the countdown to it.
- The first halving happened on November 28, 2012, the block reward was reduced from 50 to 25 Bitcoins per block. Exactly one day and one year later Bitcoin attained its then ATH of $1,242.
- The second halving happened on July 9, 2016, the block reward was further reduced to 12.5 Bitcoins per block. 17 months and 9 days later, Bitcoin attained its then ATH of $19498.
- The third halving happened on May 11, 2020, the block reward was again halved to 6.25 Bitcoins per block. 18 months later, Bitcoin attained its then ATH of $69044,77.
Following this logic, the end of April 2024 should mark the debut of a market upheaval that would bring Bitcoin to an ATH never ever seen before by Q1 2026.
To quote to a T, one of such believer: “BTC’s halving is always the thing to spark a bull run, everything else is a side quest”
Until then, current holders who are down 80%, only have to be patient, suffer a bit more and hold on tight to see their losses covered and moon to another galaxy.
They believe even more in this prophecy since the announcement of Blackrock and other powerhouse banks to get a bitcoin ETF, promising huge influx of money in the space, as well as Paypal launching their own stablecoin PYUSD, seen as a sure proof of crypto upcoming mass adoption.
Beyond the Myth
What they may not take into account in this rosy-glassed projection of the future is that the environment in which the halving will happen won’t be the same as it ever was before.
Those past years brought deep transformative change to the space.
The Halving will occur in an already very strained crypto mining landscape.
In the midst of the 2021 bull market frenzy, numerous major mining companies shouldered substantial loans, investing heavily in equipment and essential infrastructure for cryptocurrency mining.
Fast forward to the present — the fall of industry giants like Terra/Luna, FTX and Celsius, a relentless and punishing bear market, persistently high Bitcoin network hash rates, insane increase of energy price since the Russo-Ukrainian war and meager profits — the crypto mining world finds itself gripped by uncertainty.
The pressing question now is whether miners can ever bounce back from their losses, with many already filing for bankruptcy.
Leading to crypto mining stocks losing between 56%-64% of their value in the last three months.
Most of them are launched in a race against time, looking for alternative energy resources to “cut costs and ensure profits” before the halving even occur and plunge them in an even worst situation that could lead to major bitcoin minors having to turn their mining rigs off.
For some, the next halving could downright threatens Bitcoin’s security budget.
Protos reports that:
“Digital assets that use Bitcoin’s proof of work algorithm but command significantly lower hashrates than Bitcoin are often vulnerable to 51% attacks that split the chain and introduce the possibility of double-spend attacks.
Bitcoin Cash, Ethereum Classic, Bitcoin SV, and Bitcoin Gold previously experienced 51% attacks because miners couldn’t exert enough computational power to fend off attackers.”
Furthermore, from its inception until 2021–22, the crypto space enjoyed a nearly unchecked level of freedom as lawmakers worldwide focused on other matters. However, in recent times, a global regulatory movement has gained momentum, aiming to bring the crypto space under much tighter control.
This shift in the regulatory landscape is making it less appealing for current and future users, investors, and builders.
In addition to regulatory changes, the 2022 market downturn has left a profound and traumatic impact on the crypto industry.
The continuous fall of crypto actors that were seen as solid and trustworthy, only to turn out to be fraudulent schemes, has significantly eroded the trust held by existing users in the space.
And this isn’t even factoring in the continual losses associated with the rampant criminal hacking activity in the crypto sphere.
All together since January 2022, 87,5 BILLION was wiped out of the space, straight out of the pocked of crypto holders, investors and builders.
Thus, and understandably, many Web3 users have left the space altogether in the last 12 months, turning the bustling crypto space that 2021 used to be into a ghost town in dire (very dire) need of liquidity.
CEXs have now also become synonymous of ticking bombs. The issue? They are THE key actors in onboarding new users. They are the gateway to crypto. Like it or not.
The market does not only have to retain current users in a middle of a trust crisis, it also have to have the ability to bring in a massive amount of new users who will bring the massive influx of liquidity needed to take the crypto space out of the bear market.
The 2020–2021 run was fulled by the pandemic who pushed people, in uncertain time and drived by fear of the future, to get out of their confort zone and found ways to earn passive incomes if possible. Explaining the explosion of the investment platform Robin Hood, as well as people taking a dip into the crypto pool.
Conjecturally, those same people had money who pilled up due to limited ability to spend it during the pandemic period.
So retail investors with heavy pockets started to flock into the space.
The advent of NFTs was the cherry on the crypto cake.
This seemingly new, groundbreaking, fun and appealing to the mass, product would brought its own share of enthousiasts and new waves of builders and users.
Those two factors were what pushed the last bull run to the sky almost breaking $70,000 for one single bitcoin.
Halving and it’s ability to-a-point push Bitcoin value is one thing, but if the space continue to bleed out funds and people and the market does not gain the ability to be attractive to a massive new numbers of people by then, we could see the end of a myth.
The 2024-2026 period will probably be the true test to the myth.
If in very bad conjectures and with the halving alone, the market enters a bull run, then the myth will be proven to be true.
If the halving pairs up with good conjectures, then the debate will be at a stalemate.
If before the halving or 2 years after it, good conjectures trigger the new bull run then the myth will be proven wrong.
We’re currently taking the bets!
What’s your prediction?
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