The Bitcoin halving is here!
What it means - and what you can expect from Bitcoin in the next 12 months.
The fourth Bitcoin halving arrived on Saturday (AEST), almost 4 years since the last halving helped drive the Covid-era cryptocurrency bull run.
But what does the halving actually mean - and how will it impact the price of Bitcoin?
What is the Bitcoin halving?
The Bitcoin halving is when rewards to Bitcoin "miners" are cut in half, which occurs roughly every 4 years.
Bitcoin miners are the validators that process transactions and secure the Bitcoin (BTC) network.
In return for doing so, they get rewarded with a certain amount of BTC for each "block" of transactions they successfully process.
This halving is the fourth since Bitcoin began, and sees Bitcoin rewards drop from 6.25 per block to 3.125 per block. This means the amount of new Bitcoin that comes onto the market is halved.
What happens next?
Because of the deflationary effect it has on Bitcoin's supply, the Bitcoin halving has historically been a bullish catalyst for the price of Bitcoin.
In fact, its performance in the 12-18 month period following each halving has been eye-watering:
1st halving (2012)
Price at halving: US$12
Highest price reached in next 18 months: US$1,120
2nd halving (2016)
Price at halving: US$663
Highest price reached in next 18 months: US$20,000
3rd halving (2020)
Price at halving: US$8,771
Highest price reached in next 18 months: US$67,000
Of course, past performance is no indicator of future performance and there's plenty of reasons why the price of Bitcoin may not follow the same pattern this time around.
Wider macroeconomic issues, the global political environment and even the fact that the Bitcoin post-halving performance may already be "priced-in" may mean Bitcoin doesn't reach the same heights.
But Bitcoin has a knack for surprises and the next 12 months should be an interesting watch either way.
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Disclaimer: Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.