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Does halving of Bitcoin affect its price?

The “halving” of Bitcoin, a predetermined event that affects the amount of Bitcoin produced, just took place. This phenomenon transpires approximately every four years.

Miners solve complex arithmetic puzzles using farms of loud, specialized computers. They are rewarded with a set quantity of bitcoins upon solving a puzzle.

Halving reduces that fixed income by half, exactly as it sounds. Additionally, as mining rewards decline, fewer new bitcoins are introduced to the market. This indicates that the number of digital assets available to meet demand is growing more slowly.

One important aspect of Bitcoin is its limited quantity. Less than 1.5 million bitcoins remain to be mined out of the 21 million that will ever exist. Of those, more than 19.5 million have already been mined.

Prices are expected to rise as long as demand either stays the same or grows faster than supply because the halving of bitcoin will limit output.

As a result, some contend that bitcoin can combat inflation; nonetheless, experts emphasize that there is never a guarantee for future profits.

Technically speaking, the halving shouldn’t have an immediate impact on the price of Bitcoin, but given the cryptocurrency’s past performance after halving, many speculators are projecting significant gains in the coming months.

Following the halving in 2012, 2016, and 2020, the price of Bitcoin increased by approximately 93x, 30x, and 8x, respectively, from the day of the halving to the peak of the cycle.

Opponents perceive it as merely a technical modification hyped by traders to drive up the value of virtual money.

Speculators may still trade the event, though. After the halving, another JPMorgan analyst, Nikolaos Panigirtzoglou, stated on Thursday that he anticipated a decline in the short-term price of bitcoin due to overbought conditions and prices that, when volatility was considered, were still higher than those of gold. He also mentioned the muted venture capital financing of cryptocurrency initiatives.

Deutsche Bank analysts hold a similar perspective. Marion Laboure of the German Tier 1 bank wrote in a note that “we do not expect prices to increase significantly following the halving event” and that “[the] Bitcoin halving is already partially priced in by the market due to the nature of the Bitcoin algorithm.”

There have been three prior halving: in 2012, 2016 and 2020. Although many analysts are skeptical, some cryptocurrency enthusiasts point to price rises that preceded them as evidence that Bitcoin’s next halving will raise its price.

Analysts at JP Morgan stated this week, “We do not expect bitcoin price increases post-halving as it has already been priced in.”

Given that the cryptocurrency market is “overbought” and that venture capital funding for the space has been “subdued” this year, markets predict that bitcoin’s price will drop following the sale. Over time, assets with the highest potential to retain value are the usual traditional assets like gold, equities, and real estate. However, in the long run, Bitcoin may likely benefit from the digital age’s desire for more liquid assets with greater transparency.