Bitcoin We’re about a year away from a major technical event — which could be the catalyst for a prolonged climb in the cryptocurrency’s value.
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In April or May 2024, bitcoin is expected to undergo its next so-called “halving”, although the exact date is not yet known.
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Bitcoin has been rising over the past few weeks in anticipation of the halving, as a potential US Federal Reserve interest rate cut competes with the prospect of sluggish growth and tightening credit conditions due to the banking sector crisis.
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As of Wednesday morning, one bitcoin was worth about $30,000, according to data from CoinGecko. The world’s largest cryptocurrency has gained more than 80% since the beginning of the year.
Vijay Iyer, vice president of corporate development and international at crypto exchange Luno, said that bitcoin has jumped above $30,000 at a time of bank failures and economic uncertainty, suggesting that a cyclical “bottom” is forming for bitcoin.
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“This happens one year before the bitcoin halving event, which is scheduled for next April 2024,” Iyer told CNBC via email.
What is bitcoin halving?
Bitcoin halving occurs roughly every four years, or every time 210,000 “blocks” are added to the blockchain. The event cuts rewards for bitcoin miners – volunteers who run specialized equipment to validate transactions on the network and mint new tokens – by up to 50%. Its purpose is to reduce the number of new bitcoin units released to the market.
Currently, bitcoin miners receive 6.25 bitcoins for each block they successfully mine. This means that their computers had the right amount of computing power needed to solve the cryptographic puzzles that secure the bitcoin network and prevent it from being compromised by malicious actors.
Once the next bitcoin halving occurs, this reward will be reduced to 3.125 bitcoins.
Proponents of the cryptocurrency say it can help propel the price by increasing the scarcity of bitcoin.
The maximum number of bitcoins that can exist in circulation is capped at 21 million. This is ensured by the halving mechanism, which will eventually reduce the reward for bitcoin mining to $0.
According to data from CCData, before the last halving, which occurred on May 11, 2020, the price of bitcoin increased by 19% from $7,191.36 to $8,568.88 in the past 12 months.
During the previous halving — which occurred on July 9, 2016 — bitcoin jumped 142% from 12 months ago, rising from $269.14 to $651.83.
CCData data shows that the price of bitcoin ballooned by 384% from $2.55 to $12.35 for the first time on November 28, 2012.
“Upon analyzing historical bitcoin halving patterns, it appears that investors often accumulate bitcoin in the run-up to a halving event, although the exact timing and extent of returns vary,” Cryptocurrency analyst Jamie Sly told CNBC. Might.”
“The accumulation period from the market bottom to the halving date after the breakout has historically spanned at least 500 days.”
Sly said: “This would mean, if we assume the market bottom for this cycle was in November last year (when bitcoin hit a yearly low of $15,760), we are only 142 days into the current cycle. This will correlate with the next expected bitcoin halving date, which is 378 days ahead.”
bitcoin profit after halving
In the months following the halving, the price of bitcoin spiked even more.
According to CCData, after the halving on May 11, 2020, the cryptocurrency gained 688.31% in the next 546 days, reaching an all-time high of $67,549.14 on November 8, 2021.
Prior to the halving on July 9, 2016, bitcoin surged 2,824% to an all-time high of $19,065.71 in mid-December 2017.
Bitcoin had a pretty terrible 2022, defined by the collapse of major companies and projects, from stablecoin TerraUSD to crypto exchange FTX.
Rising inflation led to higher interest rates in the US and other major economies, which caused investors to flee bitcoin and other risk-on assets.
This has seen the prices of many top digital currencies fall sharply from their all-time highs.
Despite the recent climb to $30,000, bitcoin is still down more than 50% from its November 2021 high.