Bitcoin halving is an event in which the reward for mining a new block in the BTC network is halved. This happens every four years and aims to reduce the release of cryptocurrency, making Bitcoin more deflationary.
Past halvings, which occurred in 2012, 2016 and 2020, were accompanied by a significant increase in price. Investors and analysts believe this is due to increased costs of releasing new coins into circulation and increased demand. Therefore, the 2024 halving will also trigger a price increase.
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Why does halving affect the price of Bitcoin?
The impact of halving is an empirical fact, but there are many approaches to identify the cause. Among the main assumptions:
Decrease in supply. Halving means a decrease in the number of bitcoins mined. This limits their quantity, which stimulates demand, especially as interest in cryptocurrencies continues or increases.
Economic model of Bitcoin. According to experts, halving is built into the economic model of Bitcoin, and investors perceive it as a fundamental factor that can affect the price. Once investors think so, they start buying, which leads to increased demand and higher prices.
Psychology. The expectations and reactions of market participants also play a significant role. Many investors see halving as a signal for growth, so they start buying.
In reality, all three reasons are probably at work, as well as many others. Therefore, at least one should work in 2024, which will lead to an increase in price.
Some experts warn: although halving may become a catalyst for an increase in the price of Bitcoin, investors should approach this event with cautious optimism. The cryptocurrency market continues to be volatile and unstable, making price changes difficult to predict.
What’s the result?
Halving is an important event, but its impact on price cannot be predicted with absolute certainty. Investors need to consider many factors when deciding whether to buy or sell Bitcoin and be prepared for possible market fluctuations.
However, if you look at the indicators, they clearly speak in favor of buying.