The impact of Bitcoin halving according to a Bybit report

What is Bitcoin halving?

Bitcoin halving is a mechanism that halves the rate of new coin issuance periodically, guaranteeing a constant rate of issuance until the maximum expected supply is reached. More precisely, new coins are created regularly as part of the block reward, where a miner earns newly generated coins as a reward for his or her work in validating a new block. The mining process, which takes place approximately every 10 minutes at a decreasing, controlled rate, is thus responsible for the creation of new Bitcoins that enter the system. The halving guarantees that the block grant will be halved every 210,000 blocks, i.e. approximately every four years.

Market dynamics before the Bitcoin halving

Bybit's report on Bitcoin halving reveals that the impact on supply is negligible prior to the event, but investors often anticipate halving, which can lead to an early rise in price. Nevertheless, the report highlights that the current halving cycle has introduced new complexities, notably with the recent approval of Bitcoin Spot ETFs in the US. Bybit also notes a rapid decline in Bitcoin reserves on centralized exchange platforms, with just 2 million Bitcoins remaining. Assuming a daily flow of $500 million into Bitcoin Spot ETFs, around 7,142 bitcoins will leave exchange platform reserves every day. This suggests that it will take just nine months to exhaust all remaining reserves. Finally, institutional interest in Bitcoin has undeniably increased, with access to Bitcoin Spot ETFs and shares in Bitcoin-exposed companies such as MicroStrategy.

Market dynamics after the Bitcoin halving

According to Bybit's report, after halving, supply compression will clearly be stronger due to reduced rewards for miners, as well as investors maintaining their Bitcoin positions. Bitcoin production costs will also rise, making mining less profitable for some miners, who may sell their Bitcoin reserves. In addition, the report indicates that miners have begun liquidating their reserves earlier in this cycle, suggesting an anticipation of the end of the bullish price rally before the halving of 2024. However, Bybit points out that some investors will be looking to profit from new post-halving all-time highs, while the hype could lead to FOMO behavior among new investors.

Bitcoin halving, a key event in a complex market

The Bitcoin halving is a key quadrennial event that influences cryptocurrency market trends. However, the cryptocurrency market remains complex and influenced by many factors. Consequently, halving should be considered just one of many factors to take into account when investing in Bitcoin.

1. For more details on Bybit's analysis, read the full report here.
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Source: https://blog.bybit.com/en/post/what-you-need-to-know-about-bitcoin-s-pre--and-post-halving-bltd6cfc1fe77b54f58/, consulted on 17.04.24

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