Bitcoin's Halving is Behind Us: What's Next?

Last Saturday was the highly anticipated fourth halving in Bitcoin history. This event, which sees the reward for mining new blocks cut in half, effectively limits the supply of new bitcoins, aiming to prevent inflation. As a result, this has always led the market to new considerable cyclical highs in the long term, but in the short term, history tells us that its impact on the market is not as clear. While some previous halvings were preceded by a correction (2020), in other instances the market saw a correction after (2016), or it simply had no immediate impact (2012). Although this event is a considerable shock for miners, the closed adaptive loop programmed in the blockchain helps smooth the impact of this drastic reward reduction. Indeed, as this abrupt change renders some mining hardware obsolete—as the new lower reward no longer covers the electricity bills required for mining—many people shut down some of their older equipment, leading to a significant reduction in the network's capability to process blocks. This reduction in mining power triggers another mechanism that adapts the difficulty of mining a block. As a result, the remaining mining gear can suddenly process as many blocks as before, but with the reduced reward. The following graph illustrates the sequence of events during the previous halving event (2020), which closely resembled what happened during other previous similar events.

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