The recent approval of Bitcoin ETF filings has further positioned Bitcoom for global adoption. Definitely, it is rare to find someone today who has never heard about Bitcoin. With the regulatory feat, more institutional investors have now delved into the world of Bitcoin trading. This development has continued to trigger ripples of excitement in the crypto world, allowing BTC price to retest its previous all-time high.
Apart from the growing buzz around Bitcoin, another thing that drives its price is its mathematical scarcity. In fact, it is considered the first monetary asset with absolute mathematical scarcity. There can only be 21 million coins, unlike many other assets with an unlimited supply. That said, Bitcoin’s scarcity can be verified by members of the network. More so, it is regulated by an algorithm in its source code, identified as Bitcoin Core.
With the aid of this algorithm, miners are able to create blocks and mint new coins. This is expected to continue until 2140 when Bitcoin will eventually reach its capped supply. Meanwhile, there will always be an event called halving every four years or after every 210,000 blocks have been added to the blockchain. During each halving, the algorithm cuts the block subsidy, thereby regulating the supply of new BTCs. Since the number of new BTCs generated per block will be halved, there will be a reduction in the overall supply of new coins.
Does Halving impact Bitcoin price?
Without a doubt, this scarcity-oriented model distinguishes Bitcoin and places it above other currencies including fiat. According to findings, the next Bitcoin halving is likely to unfold in April 2024. After every halving, there is always a substantial rise in the price of BTC. This is no surprise as the event usually garners massive attention from the crypto community, leading to increased institutional interest in BTC.
For instance, during the 2012 halving, BTC traded around $12. However, a year after the event, it spiked to almost $1,000. Similarly, BTC traded within $650 during the 2016 halving event but jumped up to above $2,000 100 days later.
What to Expect When Bitcoin Reaches Its Maximum Supply
After Bitcoin reaches its capped maximum supply of 21 million BTC by 2140, there will be no new coins. This implies that the Bitcoin network will no longer produce more tokens. Definitely, the existing mining reward model will no longer exist as there won’t be production of new tokens. Nonetheless, miners will still be remunerated for their contributions towards keeping the network safe.
Don’t forget that the present Bitcoin reward consists of newly minted tokens and cumulative transaction fees charged in a block. So, instead of getting rewards from newly minted tokens and transaction fees, miners will now depend solely on transaction fees for incentives. However, there are concerns that transaction fees may not be worthy enough to compensate miners for their contribution to the network.
While this contention is understandable, still, the growing relevance of BTC can quench this doubt. Without a doubt, BTC is now a global phenomenon and more people keep embracing it day by day. Hence, with more people using BTC and more utility arising for it, by 2140 transaction fees will surely be hefty enough to compensate miners.
Likewise, another thing to watch out for when Bitcoin reaches its maximum supply is the scarcity of the token. Initially, the limited supply of Bitcoin and the halving of mining rewards every 4-years are factors contributing to the deflationary posture of BTC. In the long run, BTC will be more scarce which will ease pressure on its price and make it more valuable. Lastly, these are some of what to expect when Bitcoin attains its capped maximum supply in 2140.
Conclusion
It is not too late to get your hands on BTC as its supply is gradually reducing. With the next Bitcoin halving around the corner, this may be the best time to invest in the token. Against all doubts, Bitcoin has shown enough indicators to convince investors to pour funds into it for highly rewarding returns.
Nevertheless, considering the volatile nature of cryptocurrency, it is important to understand that while BTC poses high returns, there is a strong tendency that you may lose a part of your investment in it. Therefore, we urge investors not to invest more than what they can afford to lose.