In late April, the Bitcoin halving arrived on the marketplace, a highly-anticipated event that occurs every four years on the blockchain and is known for the effects it has on the prices. Most importantly, the halving is associated with growth and development, as the prices climb several times over during this event. Right before the price growth rally becomes more intense, investors start looking for how to buy Bitcoin in order to boost the value of their holdings list.
This run isn’t focused just on Bitcoin but extends to the altcoins as well, affecting the entire marketplace, meaning that when the halving arrives, the entire crypto community knows that they must prepare for the changes and volatility that will arrive on the market as well.
During the halving, Bitcoin’s scarcity became a critical topic yet again. Since this is one of the primary characteristics that gives BTC its value and keeps it far above the altcoins in spite of their frequent developments and upgrades, it makes sense that scarcity would be heavily debated among users. But what is it exactly, and how will it affect trading over both the short and the long term?
The overview
The fourth Bitcoin halving occurred right after the completion of the 840,000th block. The most obvious effect it had on the market was the reduction of block issuance rewards from 6.25 coins to 3.125 per mined block. This naturally means that the issuance rate will also be slashed in half, hence the growth in scarcity. This feature is one of the most important for the market valuation of digital gold, as it has a direct impact on the asset’s value. In this sense, the Bitcoin protocol ensures that the supply gets a boost at a much slower rate, while the halving emphasizes the scarcity.
The halving occurs approximately every 210,000 blocks, which tends to happen every four years. Before the first halving in 2012, miner rewards were around 50 coins and then dropped to 25. During the following halving events, which took place in 2016 and 2020, these earnings got even lower, gradually bringing the levels to the ones of 2024. It’s also crucial to remember that the halving has delivered substantially higher prices for Bitcoin each time and that the coin is now astronomically high compared to its early years.
But the halving and scarcity make Bitcoin different from other altcoins and traditional asset classes, including those known to act as solid stores of value.
Gold
Comparisons to gold have been rife among Bitcoin users, and over the years, the asset has even earned the nickname “digital gold”. The primary reasons for the comparisons are that BTC has made a name for itself as a store of value due to its ability to act as a hedge against inflation, maintain a relatively stable value over a longer time, and protect users against the effects of recession. However, it is still incredibly young compared to actual gold, which has been around for a very long time and is considerably more stable.
However, it’s important to remember that Bitcoin is still in its early stages and that, in retrospect, it has recorded incredible growth during the relatively short time frame. The programmed scarcity is another feature that only Bitcoin can claim since there’s no feature that’s even remotely similar to the gold markets. Depending on production and extraction methods, gold might lose even its current scarcity, while Bitcoin has a predetermined amount of 21 million coins that will ever be mined. According to investors and researchers, this makes BTC fundamentally inflation-proof, an important quality in today’s financial marketplaces prone to unchecked swelling and expansion.
Another reason for the juxtaposition between Bitcoin and gold is that nothing has matched the latter’s ability to act as a store of wealth for thousands of years. Nothing, that is, until Bitcoin, which also enjoys the benefits of a slow-growing supply and can make a bid for the same global position that gold enjoys. While gold recorded price growth levels of 19% during the past year, Bitcoin saw a growth of 122% in the same period. The reason why many believe Bitcoin is set to replace gold is also because of the development of digital finance.
A growing number of individuals and institutions have begun recognizing it as a security asset, despite the fact that only a few years ago, the majority regarded it as an untrustworthy asset that would never be able to create real revenue and build wealth for anyone. It also offers additional advantages that gold cannot provide, like complete decentralization from a geopolitical perspective, faster processes and transactions, as well as an easy, straightforward carrying process.
Corrections
Although 2024 started very well for Bitcoin, there have been corrections along the way, with some investors and researchers fearing that the risk of a bearish tendency is the highest it has been since November 2022. This is a scenario that many were concerned about, given the unrestrained growth at the beginning of the year, but given that this is the year of the halving, the downtrends are not expected to continue for long. While there has been some relief throughout the weeks, the repeated selling pressure affected the price movements overall.
But it’s also important to remember that the bears have so far not succeeded in keeping the market below the $60,000 level, but the current levels are nonetheless set to deliver losses of more than 12% for Bitcoin in April. In spite of the growth and the all-time highs of March, a continuation of the downswing trend means that this would be Bitcoin’s worst-performing month since November 2022, when the coin was at the height of one of the strongest bear markets in its history. Bitcoin is the first cryptocurrency in the world, the one that served as a blueprint for all the ones that followed and which essentially started the digital coin market.
Although it is generally much easier to predict prices and fluctuations, BTC remains a changeable asset that is prone to volatility. If you want to make sure that your portfolio remains safe, you need to come up with a comprehensive strategy that allows you to increase revenue levels and minimize capital loss.
