Bitget App
Trade smarter
Buy cryptoMarketsTradeFuturesCopyBotsEarn

Bitcoin halving: Why it’s important for BTC scarcity

CointelegraphCointelegraph2024/04/20 08:28
By:Zoltan Vardai

The fourth-ever Bitcoin halving occurred a few hours ago at the 840,000th block. The halving is considered the most important economic mechanism influencing Bitcoin ( BTC ) supply and creating scarcity for the asset.

The Bitcoin network’s fourth halving event, reduced block issuance rewards from 6.25 BTC to 3.125 BTC per mined block, effectively slashing Bitcoin’s issuance rate in half.

The halving is a crucial mechanism for Bitcoin’s scarcity and market valuation, according to Karim Chaib, the CEO of crypto platform Dopamine App. Chaib told Cointelegraph:

“Scarcity is a fundamental economic principle that affects the value of an asset. By programmatically ensuring that the supply of Bitcoin increases at a slower rate over time, the halving events underscore Bitcoin's scarcity.”

The halving is hard-coded in Bitcoin’s code base, which happens every 210,000 blocks mined, which equates to roughly every four years.

The Bitcoin network witnessed its first halving in 2012 when the Bitcoin’s issuance rate was reduced from 50 BTC to 25 BTC per mined block. The last two halvings occurred in 2016 and 2020, significantly slashing Bitcoin’s issuance rate to the current 3.125 BTC.

This hard-coded scarcity makes Bitcoin stand out from traditional store-of-value assets, according to Chaib, who told Cointelegraph:

“This programmed scarcity is a key feature that differentiates Bitcoin from traditional assets like gold, which can become less scarce as new means of extraction and production are developed. Bitcoin, by contrast, has a capped supply of 21 million coins, making it fundamentally inflation-proof.”

Related: Bitcoin supply to run out on exchanges in 9 months — Bybit

Is Bitcoin the next gold?

Bitcoin’s economic design and halving mechanism are effective mathematical methods to make Bitcoin a deflationary asset, which makes it the first reliable alternative to gold, according to Jonas Simanavicius, co-founder and CTO at Syntropy. He told Cointelegraph:

“Gold has served for thousands of years as the primary store of wealth because it is difficult to increase its supply and it is global... Nothing else came close to having a predictably slow-growing supply—until Bitcoin.”

Bitcoin price rose 122% during the past year, while Gold price rose 19%. During 2024, Bitcoin is up over 51% year-to-date (YTD), while Gold price increased 15% YTD, according to TradingView .

BTC/GOLD, Year-to-date chart. Source: TradingView

Precious metals and real estate were considered the best store of value assets throughout the years. But the digital age is seeking more liquid assets for faster movements, which will ultimately benefit Bitcoin, said Simanavicius:

“Over time, Bitcoin has not only survived, but its backing power of extensive computation and decentralization has also grown so strong that more people and institutions recognize this security, and the benefits such as immediate transactability, geopolitical decentralization, and ease of carry outweigh those of other asset classes.”

Related: Top five BTC miners not selling despite Bitcoin halving

0

Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

You may also like

PancakeSwap Launches Community Reward Initiative

Cryptodnes2024/07/06 07:43

Bitcoin Prices Affected by German Government’s $397 Million Sales

Cryptodnes2024/07/06 07:28

Peter Schiff Warns of Bitcoin ETF Risks Amid Market Volatility

Cryptodnes2024/07/06 07:28

Crypto Theft Loss Doubles to $1.38B in First Half of 2024

DailyCoin2024/07/06 06:52

‌Spot copy trading

More
AIOnline
AIOnline
insight1000/1000
9940.54%
ROI
Total profit $50696.75
WhaleGo_YouTube
WhaleGo_YouTube
insight500/500
1324.99%
ROI
Total profit $3847.28

Bot copy trading

More
AIZQUEEN
AIZQUEEN
insight20/150
$11718.02
Total profit
Total subscriber profits $35.91
GoldenEgg
GoldenEgg
insight145/150
$5644.26
Total profit
Total subscriber profits $-284.87