Bitcoin halving is one of the most anticipated events for those who follow the world of cryptocurrencies.

Partly because of its cyclical nature and partly because it brings many people closer to this universe that is often reserved for a small niche of enthusiasts.

As with all topics that spark curiosity, a sort of nebulous cloud surrounds halving, consisting of recurring questions, unresolved doubts, and unclear expectations.

Want to know more? The good news is that we want to give you all the tools to understand it better and define what we can expect as (systematic) traders.

In this video, you will learn:
-What halving is
-What are the facts that characterize this event
-How you can best prepare for the markets
-What are mining, miners, and blockchain

Enjoy watching!

Transcription

Introduction

Hello, and welcome to this brand new video! One of the coaches at Unger Academy here, and today I will talk to you about halving, one of the most anticipated events in the world of cryptocurrencies, especially Bitcoin, which happens every four years.

The last time, in 2020, was the start of one of the most important bull markets in history.

So, let's get started.

Introduction to Halving

So, what exactly is "halving"?

And what will change after that?

What should we expect from Bitcoin and its price this time?

In this video, we will try to answer all these questions and summarize everything there is to know about the halving of Bitcoin expected at the end of April 2024.

Significance of Halving

Halving is the most anticipated moment for anyone following the world of cryptocurrencies, particularly Bitcoin.

Mainly for two reasons. The first reason is it’s cyclical, meaning that we know that this will happen about every four years, so we know when it will happen.

The second reason is that this is one of the main events that bring the great masses into contact with the world of cryptocurrencies, especially Bitcoin.

Historically, halving has always marked the beginning of a strong bullish phase, and the cyclical nature of Bitcoin in that regard is impressive. As a matter of fact, there's a robust statistic in this regard.

And so most people's expectations are so high that this can repeat itself similarly.

So, let's get some clarity, especially from the perspective of new systematic traders, so that we have all the tools we need to assess what to expect.

And clarify the hard facts and what might just be speculation or expectations.

That way, we are well prepared for the markets, whatever the actual impact of Bitcoin halving will be.

Explanation of Halving

So, let's first clarify what a Bitcoin Halving is.

We said it happens approximately every four years, but that's just an approximation.

This is because cyclicality isn’t measured in years or months but in the number of blocks created in the blockchain.

We must mention the mechanism of Bitcoin creation: mining is a big competition between all the miners, meaning all the computers that the miners dedicate to this activity and those who put their computing power into solving the probability calculations necessary to validate every block in the blockchain.

The first person to successfully validate a block receives a reward in Bitcoin, which is currently 6.25 Bitcoin per block.

But after the halving, the amount will be precisely halved, becoming 3.125 Bitcoins.

So, we are talking about halving because it is nothing more than halving the rewards paid out by the blockchain to the miner who solves and validates each block.

So, assuming that the goal of the Bitcoin blockchain is to validate a block every 10 minutes and that the halving occurs exactly every 210,000 blocks, we arrive at just under four years if we multiply 210,000 by 10 minutes.

A block does not always last exactly 10 minutes.

A miner can finish it a little earlier or take a little longer.

Therefore, the exact time of halving is only an estimate. It can’t be accurate.

Mechanics of Halving

Halving in 2024, the 4th in the history of Bitcoin will therefore take place at block 840,000.

We said at the 4th, so 210,000 x 4.

As mentioned earlier, miner rewards will drop from 6.25 to 3.125 Bitcoins per block.

This halving will be repeated over the next few years until virtually no Bitcoin is paid out in 2140, which is also an approximate date.

At that point, all 21 million Bitcoins will be on the market, and no one can mine them anymore.

Impact of Halving

Let's try to do some thinking and calculations that will help us quantify the actual impact of a halving.

In particular, we can calculate the daily Bitcoin production in monetary terms to understand the impact of halving the rewards.

We said that every 10 minutes, 6.5 bitcoins are produced. So, if we multiply that by 6, we get the bitcoins produced in 1 hour, and if we multiply by 24 again, we get one day, so 900 bitcoins per day.

At the current Bitcoin price of around $50,000, this means that new Bitcoins worth $45 million are coming onto the market every day.

More than on the market, in the pockets of the miners, and we don’t know whether they resell them immediately or keep them. They all have strategies to get the maximum profit.

Either way, new Bitcoins are coming into the market every day.

So, after the halving at the end of April, we will have a reduced Bitcoin supply of about $22.5 million daily.

Of course, always at an estimated price of $50,000, which probably won’t stay constant, but that's just an estimate we are making.

So that can be the natural, quantifiable impact that Bitcoin halving will have on the market. The rest is pure speculation.

Speculation and Conclusion

However, the question arises: If the supply shrinks, will the price have to rise, as it may have in the past?

We have to be careful about drawing immediate conclusions because we have to be very clear about what this reduction in supply means and what dynamics it can trigger.

The first thing to remember is that Bitcoin is an inflationary asset precisely because new ones are produced every 10 minutes.

So, a halving can't lead to deflation, as with other cryptocurrencies regularly removed by a so-called “burn mechanism.”

However, halving can reduce the amount of Bitcoin on the market daily.

So, basically, it will reduce inflation and the growth of supply over time.

This reduction in supply over time has undoubtedly contributed to the long-term trend of Bitcoins rising in recent years.

However, at the short-term level, the movements are perhaps more due to speculation, so no one can know whether the price of Bitcoin will rise or fall a week before or a month after the halving. What is certain is that there will be a reduction in supply, which will make a difference in the long term.

Speculation is based on traders' expectations and is often priced in advance by the market.

So, because it's a known event that everyone knows when it will happen, it's difficult for something specific and predictable to occur when it does.

Indeed, there will be fluctuations, but we can't say for certain what will happen.

So, what final advice could we give?

Be aware of what the halving of Bitcoin means and what the long-term impact could be because that's the only thing that's genuinely quantifiable and predictable.

Otherwise, we can look forward to a period of increased volatility, which is certainly likely, but no one can know whether the price will rise or fall at the time of the halving or before or after, as we said.

So, the short-term speculation is fueled by those who believe that history will repeat itself and we will see another bull market right after the halving and those who believe that maybe this year will be different because conditions have changed.

It is indeed the case that if we look at the history of Bitcoin and its halving, it's incredible the statistics with which what has happened in the past has repeated itself almost every time in the same way every four years.

So, will it be the same again this year? The answer is that nobody knows.

However, other conditions could prevail, leading to a different market reaction.

For example, in 2020, we had the Covid pandemic. We had virtually zero interest rates, and there was quantitative easing, so today, the situation is definitely different, with higher interest rates.

And by the way, a relatively recent innovation, the approval of ETFs on Bitcoin, also marked a turning point in the ability to invest in this cryptocurrency market without necessarily having to know the technicalities of, let's say, the crypto world.

So, it made it possible to invest in cryptocurrencies through traditional financial instruments.

Well, I hope this video was useful for you.

If anyone among you is interested in systematic trading, click the link in the description.

From there, you can get a free presentation from Andrea Unger and our bestselling book "The Unger Method" sent to your home, only covering shipping costs.

In addition, you can book a call with a member of our team to receive a completely free strategy consultation.

And what else can we say? Thanks for listening, and here's to the next Unger Academy video!

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