Bengaluru: The most anticipated event among crypto users and enthusiasts -- Halving -- is here. The halving happens every four years and this time, it is scheduled to happen in the early hours of Saturday GMT. (April 20). The halving is a way to reduce the rate at which bitcoins are created.
Krishnendu Chatterjee, co-founder and CEO of A2Z Crypto, explains that Bitcoin (BTC) halving is the design in Bitcoin’s algorithm that halves the amount of Bitcoin mined per block after every 210,000 blocks, which by the mining difficulty, comes up to once every four years.
Traders have traditionally looked out for the halving event as past halvings have brought about huge dips in BTC prices, introducing an entry point for those wishing to accumulate BTC.
BTC as of Friday evening was trading at below $64,000, as the market sentiment is volatile amid geopolitical tensions and halving.
Rajagopal Menon, Vice President, WazirX, said, Bitcoin halving serves as a mechanism to regulate the issuance of new Bitcoin rewards to miners, who play a vital role in securing the network. The process involves cutting the block reward in half approximately every four years.
"The brilliance of Satoshi's (Bitcoin's creator Satoshi Nakamoto) idea lies in its simplicity yet profound impact: Bitcoin halving ensures a guaranteed price movement. Every four years, the block rewards for miners are halved, directly affecting their revenue. With reduced rewards, miners face the risk of going out of business unless the price of Bitcoin rises. As the price increases, it attracts more people to Bitcoin, expanding the network's user base. This influx of users contributes to the network's value, following the principles of Metcalfe's law and Reed's law," he said.
Metcalfe's law states that the value of a network is proportional to the square of the number of its users, while Reed's law highlights the exponential growth potential of networks through group formation. Therefore, Bitcoin's design inherently embeds a self-fulfilling prophecy, where increased participation leads to greater network value, attracting even more participants, Menon explained.
Post-halving it is said that Bitcoin tends to experience a parabolic rise in price.
Though predicting future prices cannot be done, experts suggest that Bitcoin has the potential of crossing the $1,00,000 mark in the long-term.
