ALN Masthead

Crypto’s Countdown to Blastoff

It’s the cryptocurrency equivalent of the Olympics.

Like clockwork, every four years Bitcoin hosts an event that drives global interest and attention.

The event, called ‘the halving’, is a programmatic feature of the Bitcoin blockchain that cuts Bitcoin rewards in half. 

The biggest immediate impact of halving is on miners.

Miners receive a regular distribution for their contribution to maintaining the Bitcoin blockchain.

Currently, miners receive a reward of 6.25 Bitcoin for every block of the blockchain that gets created.

Beginning sometime around next Saturday, this reward will get cut in half to 3.125 Bitcoin.

While this means less rewards for miners, it also means a big surge in the price of Bitcoin.

As a result of the halving, miners will earn fewer bitcoin from here on out. Fewer Bitcoin earned means fewer Bitcoins for miners to sell.

The logic is as follows:

Miners are some of the largest sellers of Bitcoin on the exchanges. Miners typically need fiat currencies (i.e. dollars/euros/yen/etc.) to pay their operating expenses like rent, electricity, and machine maintenance. In order to pay these expenses, they are constantly selling as much Bitcoin as necessary to cover their costs.

However, once the halving occurs, miners will naturally have fewer Bitcoin available to sell. 

If you’re familiar with the concept of supply and demand, you already know where I’m going with this…

A Crypto Surge is Coming

A shortage of Bitcoins with stable (or increasing) demand will push the price up.

Halving will continue to take place every four years until 2140 when all 21 million Bitcoins are finally produced. At that point, no new Bitcoins will be created.

The last time the halving occurred was in the middle of the pandemic/global recession. 

In the days and weeks leading up to the last halving, the price of Bitcoin surged.

This was despite the fact that people had other things on their minds and many people were just hearing about cryptocurrency for the first time.

By now, stories about cryptocurrency are regularly featured in the news and on TV.

Earlier this year, a Bitcoin exchange traded fund (ETF) was launched on the NASDAQ that allows anyone to buy Bitcoin from any brokerage or retirement account that lets people purchase stocks.

Familiarity with Bitcoin has never been higher, and now just about anyone with money to invest can buy it without much effort.

I expect that we’ll see a lot of coverage of the halving by traditional media over the next week. 

CNBC will invite cryptocurrency experts to talk about their expectations. The Wall Street Journal will publish articles. 

The media circus from the halving is the cherry on top that will create new demand for Bitcoin, just as supply experiences a massive reduction from the halving.

And, if that's not enough, all of this is taking place just as Wall Street begins to have concerns about the return of inflation.

In some ways, Bitcoin is the perfect currency in a world struggling with inflation – a finite resource that can easily and near-instantly be transferred anywhere around the world.

Despite Bitcoin’s major gains over the past 12 months, I believe Bitcoin and the whole cryptocurrency market are ready to go even higher. The reduced supply from halving, increased attention from the media, and increased availability via ETF all add up to the perfect storm cryptocurrency investors have been waiting for. 

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