Scary Not Scary

So how exactly does Bitcoin get its value? In short – its value is based on a “supply and demand” model. As there is less supply, the demand rises. This means that the value of BTC increases as the demand for the crypto asset increases.

When Bitcoin was first created, the creator/creators chose to create a finite amount of coins. 21 million Bitcoins to be exact. By mining the coins, the asset is made liquid and becomes active in the supply chain. The process by which the coins are made liquid is called “mining”. Miners are rewarded with BTC for every *block that they mine. Over time as more and more BTC is mined, less and less coins will be left to mine. Eventually all the BTC will have been mined and all the coins will be in circulation.

Mining Bitcoin is a very expensive process. The miner needs to have a powerful computer and access to electricity to keep the computer “mining”. The miners of today are huge corporations that have banks and banks of high-end servers, constantly running computations to mine the available coins.

* Please be aware of Bitcoin scams that promise huge returns via mining pools. It is literally impossible to mine BTC from home on your phone or home computer and make money from that process. You will spend more money on electricity than the money that you will make from “mining”. Most mining pool systems are scams – they probably do not even mine at all, but basically recruit people into their pyramid scheme and will use money from Peter to pay Paul. Do not fall into that trap.

*When Bitcoin was created, the halving mechanism was programmed into its code. The halving process is a periodic event and happens once every 210 000 blocks. Historically this has happened approximately once every 4 years.

So what does the “halving” mean? Every 210 000 blocks the reward that miners receive is halved. The initial reward for mining a block was 50BTC. The current reward for mining a block is 6.25 BTC. This means that the following halving will see the block reward for miners decrease to 3.125 BTC.

As can be seen from the above image, historically the price of Bitcoin has increased after each halving. This may be due to many factors and not only attributed to the halving, but due to the previous results, a lot of hype surrounds the halving event and this fuels the price action which follows.

The next Bitcoin halving is expected to take place in April 2024. It is difficult to predict the exact date as it depends on the block height. Since halving happens every 210,000 blocks, the next Bitcoin halving is expected to occur in April 2024 when the block height reaches 840,000.