How Bitcoin Halving Fuels the Demand for BTC?
Bitcoin dominated the news when it entered the latest bull market phase, which is also the longest bull cycle of Bitcoin that started after its halving on 12 May 2020. The demand for BTC significantly increased after the halving, and based on the data we have about Bitcoin and this event, we can notice that its price increases, and so does the demand for Bitcoin tokens. Let’s take a closer look at Bitcoin halving and its influence on the demand for BTC.
Understanding Blockchain Technology and Bitcoin Halving
Blockchain technology is based on cryptography in order to create a safe payment system that is peer-to-peer based and decentralized. Moreover, in order for the network to operate without a centralized institution, there are protocols that manage the difficulty level of the mining process as well as the number of BTC that are being produced. So, you will notice that there is a stable rate at which new BTC enters the crypto market. In fact, it takes approximately 10 minutes for one of a block of transactions to be added to the network.
The price of Bitcoin is always impacted by the supply and demand, and because this is a cryptocurrency that is based on unique blockchain technology, the protocols impact the entire supply of BTC as well the demand, which is further is fuelled by investments of institutional and retail investors.
In terms of Bitcoin halving, it was created as a protocol to split in half the current number of BTC in circulation by halving the block reward of the miners. In addition, the Bitcoin halving event cuts the inflation rate in half.
Demand for BTC
Because the number of Bitcoin tokens is restricted to 21 million, the Bitcoin halving event consistently reduces the block reward, and the demand over the years became larger compared to the supply. So, after a Bitcoin halving, the demand is growing considerably faster than the supply, which is why the price of Bitcoin is increasing. Another reason why Bitcoin has a great demand is the availability of high-quality online trading sites. For example, visit this website is an automated trading platform that is recognized for trading at a high win rate and utilizing a High-Frequency Trading strategy.
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The Miner’s Block Reward
In terms of the block reward of the miners originally, it was set to 50 BTC, but each halving diminished its worth to 6.25 BTC in May 2020. It’s worth noting that this event will continue to exist as long as there are Bitcoins left to be mined.
It reduces the supply of BTC as we said there are approximately 3 million BTC left to be mined, and at this rate, we expect for them to enter the market in 2140; Hence, the demand is in a better position thanks to the high costs of mining. This again made a demand for BTC even greater because Bitcoin remains a scarce asset. And, by default, an asset that is in demand and scarce has a greater value.
Also, Bitcoin is a decentralized cryptocurrency that has limited supply, and there isn’t a protocol that allows new BTC to be created after the original supply is mined. This is why Bitcoin has reached the status of the safe-haven asset, while Bitcoin halving is one of the events that triggered the rise of Bitcoin as a good store of value.
So, today there are many institutional investors and famous companies that further support the growth of the cryptocurrencies, such as Microsoft, Home Depot, Overstock, Shopify, and many others.