Simon Peters, cryptoasset market analyst at multi-asset investment platform eToro, says: All focus now on the bitcoin block reward halving
Last week was fairly muted in the crypto markets despite some hotter than expected inflation data from the US.
However, with all focus now on the bitcoin halving, set to happen this Saturday 20th April (at time of writing), we’ve seen a significant bitcoin pullback, as 24/7 traded bitcoin became a proxy for rising geopolitical tensions and the sell-off in global stock markets.
The ‘halving’ is an event that, as the name suggests, reduces the reward for successfully mining a block by half. A halving on Bitcoin occurs every 210,000 blocks that are mined, and with new blocks taking about 10 minutes to be added to the chain, a halving happens roughly every four years. The last halving was in May 2020 and the last ever halving will be sometime in the year 2140 by estimates.
This halving the block reward will drop from 6.25 bitcoin to 3.125 bitcoin per block, and the annual supply inflation rate will effectively fall from around 1.70% to 0.84%. When supply falls, a price tends to rise, and historically this has been the case with bitcoin
The halving is such a highly anticipated event in the crypto world because it has generally marked the start of the next bitcoin bull market, with the price surpassing the previous all-time high within six to eight months, and the bull market peak coming 12 to 18 months after the halving. This time round however is the first time we’ve seen the bitcoin price surpass the previous all-time high before the block reward halving has even occurred, albeit with a pullback over the last few days.
The question on every bitcoin investor’s mind now is if we will see the price rally again to fresh all-time highs given the immediate supply shock from the halving, or will the price fall even lower, with the halving becoming a sell-the-news event after all the build up, similar to the bitcoin spot ETF approval earlier this year?
EYE-CATCHING STORIES
Bitcoin mining difficulty hits fresh all-time high in latest adjustment
In the final adjustment before the block reward halving, the ‘difficulty’ (essentially how hard it is for a miner to find the target hash and add a new block to the Bitcoin blockchain) has reached a fresh all-time high.
The difficulty adjustment occurred at block height 838,656, reaching a record of 86.39 trillion.
Bitcoin mining difficulty adjusts every 2016 blocks, roughly every two weeks, to ensure the time between blocks being added to the Bitcoin blockchain stays at around 10 minutes, regardless of what the overall computing power (the hashrate) is, or how many miners are active on the network.
The higher the difficulty the more computational power that is needed to find the target hash.
With difficulty (and concurrently hashrate) at all-time highs, this suggests miners have been investing in new computing hardware in preparation for the upcoming halving and the drop in block reward.
Hong Kong approves bitcoin spot ETFs
Yesterday Hong Kong regulators approved its first spot bitcoin and ether exchange traded funds (ETFs), paving the way for the city to become Asia’s first to accept the cryptocurrencies as a mainstream investment tool, reports Reuters.
The approval also potentially lays the ground for other neighboring countries and jurisdictions to follow suit with their own ETFs.
More potential investors and integrations into the traditional financial system could bode well for the bitcoin price.
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