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The Bitcoin Halving

by Alan Daniel
woman smiling at bitcoin halving

Bitcoin halved on May 11th, but what does that mean? 

For that, we’ll have to understand what bitcoin is and what it seeks to provide. Bitcoin is a peer to peer value network. Users can opt in to the network by downloading a digital wallet, receiving bitcoin, the native asset of the network, and sending bitcoin.

There are no third parties involved in the system. 

Anyone can be a miner or a payment processor by running a bitcoin rig. People and groups of people participate in this process to help run the network and earn bitcoin rewards.

Why would they want to earn bitcoin rewards?

Bitcoin was worth nothing at one point, but now one unit of bitcoin trades at around $8,000. Earning bitcoin is lucrative if one has the right process and expect it to increase in value over the long term.

That begs the question of why will bitcoin increase in value over time?

The answer is scarcity as bitcoin has a hard supply cap at a total of 21 million bitcoin. Bitcoin has yet to reach this total supply release schedule. Further, remember those miners, around every four years, bitcoin decreases the bitcoin reward and increases the difficulty of gaining bitcoin. This was another recent reward halving with another scheduled for around 2024.

As supply decreases and demand increases, the price of bitcoin should rise. 

Demand for Bitcoin

But why will there be more demand for bitcoin?

Protect Against Inflation

Bitcoin has a capped supply. There is consensus around the fact that it is portable, valuable, scarce, and useful in payments and retaining value. Users in countries like Venezuela and Argentia others turn to it to protect against inflation issues in their local economies.

Lack of Trust in the Current Financial System

Depending on who you ask, things are starting getting very weird with fiat currencies like the dollar, the euro, and the Japanese yen. 

Savers seem to get punished with low-interest rewards for holding cash in bank accounts, causing them to seek yield elsewhere. Debt markets seem bloated but continue to gain steam as more corporations gorge on debt. Further, equity markets seem overvalued in places like the United States, where investors have to pay more for earnings or for a growing list of unprofitable companies.

A few experts expect a yield slump in equities over the next decade. This, despite efforts of the Federal Reserve to buy corporate debt exchange traded funds and other measures it is currently taking to stave off lack of confidence.

The financial picture did not look as rosy for governments and households before the coronavirus hit, and it seems even worse after.

Bitcoin serves as a censorship-resistant, digital gold hedge against issues in the traditional financial system. It also presents opportunities for vast upside potential. In a world where governments continue to devalue their currencies, sound money assets like gold and digital gold might be a great bet.

Digital Economy

The digital asset has only been around for ten years but has birthed a new industry. Digital networks and assets like ethereum and others came after bitcoin but were buoyed by bitcoin. Growing systems continue to follow bitcoin’s lead.

Corporate Interest

Corporations like Facebook, Galaxy Digital, Square, and other companies have formed services that support bitcoin and the digital asset ecosystem. Respected financial legends such as Paul Tudor Jones and others see bitcoin as a macro asset that serves a role in the modern portfolio.

Bitcoin halved on May 11th, but what does that mean? 

For that, we’ll have to understand what bitcoin is and what it seeks to provide. Bitcoin is a peer to peer value network. Users can opt in to the network by downloading a digital wallet, receiving bitcoin, the native asset of the network, and sending bitcoin.

There are no third parties involved in the system. 

Anyone can be a miner or a payment processor by running a bitcoin rig. People and groups of people participate in this process to help run the network and earn bitcoin rewards.

Why would they want to earn bitcoin rewards?

Bitcoin was worth nothing at one point, but now one unit of bitcoin trades at around $8,000. Earning bitcoin is lucrative if one has the right process and expect it to increase in value over the long term.

That begs the question of why will bitcoin increase in value over time?

The answer is scarcity as bitcoin has a hard supply cap at a total of 21 million bitcoin. Bitcoin has yet to reach this total supply release schedule. Further, remember those miners, around every four years, bitcoin decreases the bitcoin reward and increases the difficulty of gaining bitcoin. This was another recent reward halving with another scheduled for around 2024.

As supply decreases and demand increases, the price of bitcoin should rise. 

Demand for Bitcoin

But why will there be more demand for bitcoin?

Protect Against Inflation

Bitcoin has a capped supply. There is consensus around the fact that it is portable, valuable, scarce, and useful in payments and retaining value. Users in countries like Venezuela and Argentia others turn to it to protect against inflation issues in their local economies.

Lack of Trust in the Current Financial System

Depending on who you ask, things are starting getting very weird with fiat currencies like the dollar, the euro, and the Japanese yen. 

Savers seem to get punished with low-interest rewards for holding cash in bank accounts, causing them to seek yield elsewhere. Debt markets seem bloated but continue to gain steam as more corporations gorge on debt. Further, equity markets seem overvalued in places like the United States, where investors have to pay more for earnings or for a growing list of unprofitable companies.

A few experts expect a yield slump in equities over the next decade. This, despite efforts of the Federal Reserve to buy corporate debt exchange traded funds and other measures it is currently taking to stave off lack of confidence.

The financial picture did not look as rosy for governments and households before the coronavirus hit, and it seems even worse after.

Bitcoin serves as a censorship-resistant, digital gold hedge against issues in the traditional financial system. It also presents opportunities for vast upside potential. In a world where governments continue to devalue their currencies, sound money assets like gold and digital gold might be a great bet.

Digital Economy

The digital asset, bitcoin, has only been around for ten years but has birthed a new industry. Digital networks and assets like ethereum and others came after bitcoin but were buoyed by bitcoin. Growing systems continue to follow bitcoin’s lead.

Corporate Interest

Corporations like Facebook, Galaxy Digital, Square, and other companies have formed services that support bitcoin and the digital asset ecosystem. Respected financial legends such as Paul Tudor Jones and others see bitcoin as a macro asset that serves a role in the modern portfolio.

Change seems slow but innovation is present within the digital asset ecosystem as companies such as FigureLending and more continue to use the power of digital assets and networks to lower costs, improve efficiency, and settle transactions.

 

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