The next Bitcoin halving is imminent and price volatility is likely
For only the fourth time, there is a Bitcoin Halving on the horizon. Occurring -- roughly -- every fours years, the first took place in November of 2012, the second in July of 2016, and the third in May of 2020. The next is due on April 19 or 20.
The exact date and time is not known as a halving takes place every 210,000 blocks, and it is a mechanism designed to make Bitcoins rare. But just what does it mean in practice for both miners and investors? While it is hard to predict precisely what will happen, market volatility is likely to be the order of the day.
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The halving is central to the working of Bitcoin, and is part of the protocol that underpins the entire system. When a halving happens, the reward miners who find a new block receive is halved.
Back in 2009 when Bitcoin was created, the reward stood at 50 Bitcoins, dropping to 25 in 2012, 12.5 in 20167 and 6.25 in 2020. When this week's halving takes place, it will fall to 3.125 Bitcoins.
In previous years, the roll around of the halving has led to an increase in trading in the run up to the event, and this has been the case in recent months. Price volatility is likely and is set to continue for some time after the halving. If past trends continue, when the fourth halving has taken place, the price is likely to have increased significantly. With Bitcoin generating more interest than ever, though, exactly what happens is becoming increasingly difficult to predict as past trends are not necessarily transferrable.
With mining made less profitable, smaller mining operations are likely to find that the costs involved -- largely the cost of electricity -- make things unsustainable, so lesser player can be expected to vanish. One thing is certain for everyone involved at all levels: there will be volatility and instability for a while.
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