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What is a Bitcoin halving, and why does it matter?
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The world’s largest cryptocurrency by market capitalization, Bitcoin (BTC-USD), remains in focus among many investors seeking growth. One of the key potential upcoming growth drivers for this key crypto will be the upcoming Bitcoin halving, set for some time in 2024.
With this Bitcoin halving event on the horizon, the window of opportunity to buy “cheap” Bitcoins may be closing. For this reason, many experts have pointed to 2023 as a great period to start loading up on this top crypto.
Let’s dive into what this Bitcoin halving event means and what crypto investors should expect from this token moving forward.
It’s not really possible to predict exactly when a Bitcoin halving event will happen. Essentially, a halving takes place every 210,000 blocks, which has typically taken around four years to materialize in the past. If this trend continues, the previous four-year window (2012 halving, 2016 halving, and 2020 halving) will remain intact. That said, we could see this halving sooner, with some calling for a late-2023 date, potentially.
A Bitcoin halving refers to the halving of mining rewards on the Bitcoin network. With half the amount of Bitcoin minted as a reward for miners to validate transactions and secure the network, Bitcoin’s price would need to rise to justify the energy output required to mine Bitcoin.
Bitcoin mining involves highly-specialized computers which solve complex cryptographical problems on the blockchain. Thus, the energy usage for this so-called proof-of-work mining system is immense.
For this activity to be economically viable, the price of Bitcoin in U.S. dollars needs to be above the break-even rate, or else the network could see reduced security and longer lag times in transaction processing. Thus, in previous halving cycles, the price of Bitcoin had moved higher around the event (before, but mostly after, said halving).
The number of Bitcoin halving cycles we have to rely on is limited. There’s only been three thus far in the entire life cycle of Bitcoin. Therefore, it’s a small sample size for investors to base their investing decisions on.
However, using history as a guide, there’s a strong correlation between halving events and a surge in Bitcoin’s price. It’s hard to think why this time may be any different (other than the fact that we’re in a starkly different macro environment).
Accordingly, for those looking to play the odds, this upcoming halving event is the key catalyst to watch. It’s certainly on my radar and one I think should be getting more attention right now.
There’s a reason why many investors believe Bitcoin is a viable investment in 2023. There are the defensive attributes BTC provides relative to USD-denominated investments in times of currency crisis. There’s the decentralized nature of the network and Bitcoin’s size relative to other digital assets. And then there’s the upcoming halving event, which I anticipate more investors will watch closely.
I believe that Bitcoin is likely the most stable and viable option for investors outside the crypto space to add exposure to. Thus, if institutional demand for crypto picks up, Bitcoin will be the likely beneficiary.
With this in mind, Bitcoin looks well-positioned for solid performance in 2023 and 2024. We’ll see how everything plays out. Indeed, the volatility in the crypto sector works in both directions, so nothing is a sure thing.
That said, this is a top cryptocurrency to which investors should pay attention ahead of this key event.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.
Article printed from InvestorPlace Media, https://investorplace.com/2023/04/bitcoin-halving-2023-the-final-chance-to-buy-cheap-bitcoins/.
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