Historical Data Analysis Of Bitcoin Halving Event

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INTRODUCTION

The concept of Bitcoin halving is one that has been talked about for a long time now and will continue to be talked about for generations to come, Bitcoin halving is basically an event scheduled and programmed to happen or occur approximately every four years so as to reduce the block reward that Bitcoin miners receive by half, it is critical and essential aspect of the cryptocurrency's lifecycle.

As a result, Bitcoin halving can be considered and said to be a deflationary mechanism whoose aim is to limit and ensure that the Bitcoin's total supply does not go over its restricted value of 21 million coins, over the years the effects and impact of Bitcoin halving has been plainly seen, as they influence market dynamics, mining activities, and investor's sentiment.

HISTORICAL ANALYSIS OF BITCOIN HALVING

In this post of mine I will be explaining and discussing some of the historical analysis done in regards to the impacts and effects of Bitcoin halvings in the different area and sector of the block chain network, cryptocurrency market or in the mining process.

• CHANGE IN MINING DIFFICULTY

Based on historical analysis (reports, records and research compiled over years), it has been shown and made clear that one of the significant effects and impact of bitcoin halving is that it influences the process of Bitcoin mining hence increasing the level of difficulty in mining, as a result to reduce their participation in mining operations.

Another noticeable effect in terms of mining is that after a halving event some miners, especially those running a higher cost mining operation, may decide to reduce their participation or quit entirely seeing as the profit from the mining operations after subtracting the cost of operations is too small or may even cause them financial debt.

However, it has also been made clear by historical analysis that these impacts and are effects over time stabilizes and miners adapt and get use to the new normal, this stability however lasts for till the next halving event, this is the bitcoin's cycle of growth.

• ITS INFLUENCE ON ALTCOIN MARKET

According to historical data and analysis it has been shown and noticed that bitcoin halvings also poses significant effects and impact that cuts across its own network, the traditional cryptocurrency to the alternative cryptocurrency and influencing the market dynamics of the altcoin.

Additionally, during the days or periods leading to the halving events and the times and periods after the halving event, it has been noticed times and times again that altcoins experiences an increase or rise in its volatility perhaps owing to the fact that investors moved by market sentiment withdraw their funds and invest it in Bitcoin.

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Furthermore, historical analysis also shows and indicates that significant Bitcoin rallies after a halving schedule most of the times leads to initial capital inflows into the Bitcoin network however after that investors diversify this investments into altcoins so as to get higher returns from cryptocurrencies with lesser supply limit.

• MARKET SENTIMENT AND INVESTOR BEHAVIOR

Another effect and impact of Bitcoin halving that has been noticed and analysed time and time again is in how halving events affect the psychological and mental state of a cryptocurrency user, investor or just the yet to be crypto user, take for example in the months or periods leading to the Bitcoin halving event, creates anticipation in users, it also often lead to increased media attention as a result increasing adoption and participation from new users.

Historical records and analysis has shown owing to different emotions or sentiment perhaps as a result of the fear of missing out (FOMO)indicates that each halving has been accompanied by a surge in new investor entries and heightened trading volumes.

Take for example what happened around the 2016 and 2020 halving events, Google Trends data shows an increase in users searches for "Bitcoin halving", and after that a corresponding increase in market activity and investments.

• SUPPLY REDUCTION AND LONG TERM SCARCITY

Another historical analysis is in that bitcoin halving events inherently introduces and causes a supply shock to the cryptocurrency or Bitcoin market owing to the increased scarcity that the reduction in the supply and issuance of new Bitcoin.

Additionally, this increased scarcity ensures and facilitates the maintained value or price of the Bitcoin cryptocurrency which makes a preferable store of value for investors seeking to curb and mitigate the risk of inflation that is prone in the traditional fiat currencies, just like the physical asset gold, a rare metal which maintains a stable value.

Historical analysis done on the Bitcoin's stock to flow ratio shows a significant increase in the bitcoins price after the halving event as a result strengthening the value attained by the scarcity the halving events ensures.

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CONCLUSION

In conclusion, analyzing the historical data surrounding Bitcoin halvings shows consistent patterns of increase and decrease, rise and fall during the periods leading to the halving and the periods after the halving.

All these analysis and research on the effects and impacts of Bitcoin halving has shown that it does not only facilitates the Bitcoin's deflationary mechanism and nature but it also enhances its appeal and preferability as a scarce digital asset for storing value in a long term.