Bitcoin price volatility appears to be decreasing
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What is Bitcoin halving?
Bitcoin is a digital currency that operates freely from central control. Rather than an authority like a bank or government tracking who owns what, Bitcoin relies on encryption.
So-called miners collect information about transactions and record them on a ledger called a blockchain. These miners perform a huge number of calculations with the aim of completing cryptographic problems, 0.69% of the world's electricity in the process. The first miner to solve this problem adds a collection (block) of transaction data to the blockchain.
You will also be rewarded with a certain amount of newly created Bitcoins. Bitcoin is built into the source code that writes and runs the network. Every 210,000 blocks, an event called a halving occurs where the size of the reward is reduced by 50%. This is intended to avoid inflation due to too many coins being created.
The first block ever mined gave a reward of 50 coins, which is now down to 6.25 coins after three halvings. The last halving was in May 2020.
When is the next Bitcoin halving?
The next Bitcoin halving is expected to occur around April 19th, reducing miners' rewards to 3.125 coins. The reward continues to decrease and disappears completely around 2140 after 21 million coins have been created. At that point, there are no new coins.
Why is it important?
For those who use Bitcoin to purchase goods and services or hold Bitcoin as an investment, nothing changes. The current Bitcoin pool will remain. However, for miners, the value of the rewards they receive will be significantly reduced.
This could lead some miners to close up shop if they decide the effort isn't worth the reward. But the reality is that mining economics are constantly changing, and the industry is likely to adapt and continue as it has always done.
More powerful computers are being created all the time that can perform mining calculations faster, making it easier to mine blocks. However, the feedback mechanism within Bitcoin's code constantly adapts to this by increasing or decreasing the difficulty of calculations depending on the total computer power currently allocated to mining. The purpose of Bitcoin's source code is that a new block is created approximately every 10 minutes, and the network adjusts to speed up or slow down as needed.
When Bitcoin was first launched in 2009, it was possible to mine coins almost instantly with even a basic computer. Nowadays, you need a room filled with powerful equipment, often high-end graphics cards and computationally proficient custom hardware.
What will happen to the price of Bitcoin?
The recent emergence of exchange-traded funds (ETFs), regulated financial products offered by large banks that offer an easier way to invest in Bitcoin, has been long anticipated and was expected to drive up prices. .Some analysts are now estimate Approximately 704,400 coins are already in the hands of the ETF.
There are currently two schools of thought regarding the effect of half-life. Some think the halving will give Bitcoin more impetus, causing the price to rise further, while others think the impact is already priced in. Regulatory approval for Bitcoin ETFs is by no means certain, but the halving is a certainty, so its impact may already be reflected in the price. But it's almost certain that halving won't double the price.
The wild price fluctuations that Bitcoin has experienced over the past few years have become less frequent, and metrics that track volatility seems to be on a downward trend. But at the end of the day, any discussion about Bitcoin's price is just speculation.
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Source: www.newscientist.com
