Bitcoin Magazine Pro’s latest analysis of the cryptocurrency market reveals that the coming year will see a demand-driven event in Bitcoin, rather than a supply-driven one. This phenomenon is anticipated due to the upcoming Bitcoin halving, an event that occurs approximately every four years, where the reward for mining Bitcoin is halved. The next halving is due in about one year, and past trends indicate a considerable increase in Bitcoin’s value after halving. However, what sets this upcoming halving apart is the significant difference between long-term holder dynamics and mining.
The article explains the hard-capped supply of Bitcoin, which ensures that only 21 million Bitcoins will ever exist. This supply is derived from the issuance schedule, which is reduced by half every 210,000 blocks, or four years. The article emphasizes that the Bitcoin halving is most likely to affect the demand-side and not supply-side of the market. The reason being, long-term holders have already staked their ground, and Bitcoins held tightly by these groups make up most of the circulating supply. This group tends to surface the Bitcoin market only after a substantial increase in Bitcoin’s exchange rate.
On the other hand, mining is a supply-side phenomenon. Every 10 minutes, Bitcoin miners confirm a batch of Bitcoin transactions, the first person to solve the cryptographic puzzle receives a block of newly minted coins. This process also incentivizes the use of computing power to run the Bitcoin code. A miner’s reward, the block subsidy, combined with the transaction fees received, is known as the block reward.
Since 2012, every halving cycle has brought about a significant increase in Bitcoin’s price and corresponding liquidity jumps. However, this upcoming halving could set new records for Bitcoin to climb even higher. The chart below shows a comparison of the miner’s net position change overlaid with the Long-term holder net position. It clearly shows how much larger the tide of holder accumulation and distribution is compared to the miner sell pressure.
The article concludes that the halving reinforces the reality of Bitcoin’s supply inelasticity to changing demand. As education and understanding about Bitcoin’s superior monetary properties further perpetuate globally, there will be an influx of demand while its inelastic supply makes the price rise exponentially. The Bitcoin halving is an event that is closely monitored by Bitcoin investors worldwide, and its impact on the Bitcoin market is yet to unfold.
According to https://bitcoinmagazine.com/markets/holder-dynamics-one-year-until-the-bitcoin-halving
The material in this article is written on the basis of another article.