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Bitcoin bulls eye supply growth drop below 1% for first time ever in April halving

Published 03/16/2024, 10:28 AM
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BTC/USD
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By Yasin Ebrahim

Investing.com -- Bitcoin supply growth is set to drop below 1% for the first time ever next month, when the ‘halving event’ gets underway, underscoring the popular crypto’s scarcity premium and likely fueling the current bull run just as institutional investors join the race to ‘hodl’ the popular crypto.

"Bitcoin supply growth is currently about 1.7% and that will be reduced to a bit under 1% for the first time in bitcoin history,” at the next halving event, expected “sometime on April 17”, Bill Laboon, Director of Education and Governance Initiatives at Web3 Foundation told Investing.com’s Yasin Ebrahim in an interview on Thursday.

Halving events, which occur once every four years, cut the amount of bitcoin that is produced on the bitcoin blockchain, or network, by miners in half --- hence, ‘halving.’  

But what exactly gets halved?

The only way to make bitcoin is by producing blocks for the Bitcoin network. Each block currently produces 6.25 bitcoin that is distributed to the miners responsible for validating transactions stored in blocks on the blockchain. But at the next halving event, this reward will be halved to 3.125 BTC, slowing the rate at which new bitcoin is minted and increasing its scarcity as well as price.

About 19.6 million bitcoin, roughly 93.59%, of the total 21 million bitcoin has already been mined. “Going forward miners are going to be fighting for a much, much smaller issuance of Bitcoin in every block,” Laboon said, adding that there’s still aways to go until the last block is mined, expected sometime in 2140.

Since its inception in 2009, there have been three halving events that have reduced the supply growth of bitcoin from a 25% rate to just under 2% currently.

Halving history appears to be smiling bitcoin bulls

During previous four-year halving cycle, the price of bitcoin has followed a distinct path across three main periods: pre-halving, halving, and post-halving.

In the prior cycle in May 2020, Bitcoin was trading around $9,000 pre-halving, but after the halving on 11 May 2020 started a bull run to an all-time high of $68,982.20 by November 2021 before undergoing a significant correction.

The 18-month period between bitcoin halving and the peak price is consistent across historical data from previous halving cycles. With the current peak in BTC price expected to be reach during the third week of October 2025 at a time when institutional investors are entering the fray -- following the launch of a spot-bitcoin ETFs in January this year -- many are optimistic that there is plenty of runway left in the current bull market.

US-based spot Bitcoin ETFs have racked up over $60 billion in assets under management as of Mar. 16, data from Coinglass showed, with Blackrock''s iShares Bitcoin Trust (NASDAQ:IBIT), and Fidelity's Fidelity Wise Origin Bitcoin Fund (NYSE:FBTC) leading the charge.

Bitcoin is evolving . . .

After the last block is mined and 21 million bitcoin is in circulation, many worry about what the future holds for the bitcoin blockchain as the miners may be less incentivized to continue network upkeep without the reward for producing new blocks.

But the use cases for bitcoin -- beyond just transferring bitcoin from one user to another – are beginning to emerge, increasing activity on the network and the related transaction fees that may turn to out be much more lucrative than the reward miners receive for churning out new blocks.

“We've actually seen over the last year or so, there have been other uses of the Bitcoin network besides just transferring Bitcoin around, most famously ordinals,” which can be thought of as a “super NTFs (non-fungible tokens),” Laboon said.

“As time goes on, this fee market is going to take over from new issuance of Bitcoin in order to ensure that miners are still are paid to do the work of continuing security in the network,” he added.

The rise in the creation of layer-two technologies or off-chain networks -- built on top of layer-1 blockchains like bitcoin – is a “very big area for growth,” for bitcoin, Laboon added, as it allows people “to use the security of bitcoin to run more complicated programs that were done, sometimes on other blockchains.”

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