Bitcoin halving cycles and why they mean less and less.

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Bitcoin halving cycles and why they mean less and less.

As every crypto vet knows, the long term price action of crypto, and BTC in particular, has historically been controlled by the BTC halving cycle. For anyone who doesn't know, Bitcoin has a set reward paid out to the successful miner of each block. 1 BTC block is mined approximately every 10 minutes. Originally, this reward was 50 BTC. However, every 120k blocks, or about every 4 years, the reward is halved. There have been 3 halvings so far, as can be seen in this chart. Currently, the block reward is 6.25 BTC.

The most important thing to note about the chart is that shortly before a halving and then for a long time after, there has consistently been a huge bull market, followed by a bear market, and then a consolidation and accumulation period before the next halving and bull market. Again, every vet should recognize this, but many newbies won't. Although no one is completely sure, these halvings are believed to impact the price of BTC in this way due to the laws of supply and demand. During a halving event, the inflation rate dramatically shrinks and the miners (who presumably own a large percentage of the supply) have a shift in their economic incentives due to the anticipation of smaller supply.

Now, as you can also see in the chart linked above, each consecutive bull market has been longer and caused a smaller rise in price. This is because each halving has less of an effect on the price. Here is a chart showing the total supply and block rewards over time. In the first halving in 2012, with a supply of around 10.5 million BTC, the block reward dropped from 50 to 25 resulting in a daily supply growth change from 7200 BTC to 3600 BTC or a yearly inflation rate drop from 25% to 12.5% overnight. This inflation change is clearly hugely significant. However, the next inflation drop was less significant, from 8.2% to 4.1%, with the most recent one being less significant than that, from 3.5% to 1.75%.

The lessening impact of these inflation adjustments during halvings combined with the trend of crypto whales being more likely to be institutional investors and less likely to be miners has been and will continue to lead to the end of BTC cycles. The one we are currently experiencing has already bounced some previous trends with this double peak, and although I am still expecting a dip soon, it will probably be the last clear cycle with an obviously parabolic bull market and a long, cold winter after.

In terms of what you should take away from this, you should realize that we aren't early anymore. The market is on its way to stabilizing, and although the ordinary American still isn't invested, all the institutions are at least exposed in some way. However, this is still bullish. Stability is attractive and leads to mass adoption, and big gains can still come from new altcoins because although the market is no longer new, much of the tech is. It also means that if/when the next crypto dip comes, it may be your last chance to load up on the big boys at a "low" price. I know this has been kind of a wall of text, but I hope it helps someone.

submitted by /u/alexb_090
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