The Bitcoin Halving has Finally Happened

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Bitcoin halving has finally happened…. a few days ago actually. But what has happened?

In this edition of our newsletter, we delve into a pivotal event in the cryptocurrency world that has both short-term traders and long-term investors buzzing: the recent Bitcoin halving. This newsletter will explain what a halving is, its historical context, and what it might mean for the future of Bitcoin and the broader crypto market.

Quick Introduction to Bitcoin

First, let me just give a quick introduction to Bitcoin. It is the first decentralized digital currency, was introduced in 2009 as an alternative to traditional fiat currencies controlled by governments. It operates on a technology called blockchain, a public ledger that records all transactions securely and transparently. You can read the full white paper here.

The Fourth Bitcoin Halving: A Detailed Look

On 19th April, the Bitcoin network completed its fourth halving, reducing the mining reward from 6.25 to 3.125 bitcoins. This event is significant because it decreases the rate at which new bitcoins are generated, thereby constraining supply and potentially increasing the cryptocurrency's price if demand remains steady or grows.

Historical Price Impact of Bitcoin Halvings

Bitcoin halvings have traditionally led to interesting market dynamics. Here’s a brief look at past halvings:

• First Halving (2012): The price increased from about $12 to over $1,100 within a year.

• Second Halving (2016): Prices rose from $650 to around $2,500 in 2017, eventually spiking near $20,000 by year's end.

• Third Halving (2020): The price hovered around $8,500 pre-halving and surged to historical highs above $64,000 in April 2021.

Despite the reduction in block rewards, the immediate aftermath of the 2024 halving has shown only a modest decrease in Bitcoin's price to $64,000, suggesting a more muted immediate impact compared to previous events.

Mining Economics and Future Predictions

Post-halving, the mining sector might see significant shifts:

• Smaller miners may struggle to stay profitable, potentially leading to consolidation in favor of larger, more efficient operations.

• Surprisingly, despite the reward cut, mining profitability has soared due to an increase in transaction fees, which hit a record $2.4 million for the first block post-halving.

Analyst Predictions and Market Sentiments

Analysts from major financial institutions like JPMorgan and Deutsche Bank have indicated that while the halving's impact might be baked into the current prices, the future trajectory of Bitcoin will likely be influenced by broader economic factors such as central bank policies and regulatory changes, rather than the halving itself.

Conclusion: What Lies Ahead for Bitcoin Investors

As a Bitcoin Investor, I personally adopted the “Buy and Hold” method. I usually keep it within 8% of my investment portfolio. Why 8% you might ask? There is no scientific method to it. 8% is just a number that is small enough that I will sleep soundly when the Bitcoin prices fluctuates (and it does fluctuates a lot). Also, it is an allocation that can have a significant impact on my portfolio if it rises up greatly.

Bear in mind, Bitcoin is a very new asset class! It is only 14 years old compared to other asset classes such as gold and stock markets which are centuries old.

While Bitcoin prices have generally increased much more after each halving, it remains to be seen if history will repeat itself, or are we on the cusp of a new pattern? Only time will tell, but either way, we’ll be here to provide you with insights every step of the way.

Lastly, take note that this is not investment advise, please consult your own financial advisor for that. And if you are wondering, your financial advisor is a good one, you can check out Rainbook below.

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For your Financial Freedom!

Pete