News hardware Bitcoin: the recovery soon? You will have to be patient…
In recent months, Bitcoin has seen its price drop from €68,000 to €20,000, dragging down the rest of the cryptocurrency market. Ever since this drop was triggered, investors have had their eyes on BTC and have been desperately waiting for the cryptocurrency to rally. Some have even started to reinvest in the hope of an impending price rise. However, according to several elements, the long-awaited comeback could take longer than expected.
Bitcoin Cycles: From Bear Market to Bull Run
Since the creation of Bitcoin, you have surely been able to observe upward phases and downward phases on cryptocurrency, in the same way as other more traditional assets such as stocks. Therefore, when Bitcoin is at its highest, everyone is talking about it, it is usually a sign that the speculative bubble around the crypto is about to burst. So, once its bull run is over, Bitcoin goes back into the shadows and you don’t hear about it for a few months or even years until its value picks up again.
These cycles have names, we are talking about:
- “Bull Run” when demand is strong and the price increases
- “Bear market” when it stagnates or declines due to an increase in the number of sellers In finance, bulls (bulls) represent buyers and bears (bears) symbolize sellers.
In total, since its creation, bitcoin has generally experienced four bull runs and three bear markets.
Are we witnessing the fourth BTC bear market?
Bitcoin in Bear market?
Although the digital asset behaves like another value in the rhythm of rises and falls, admittedly in a more volatile way, it also has variables of its own.
According to some investors, bitcoin, which has seen a significant rise since March 2020, is entering a bear market. Among other things, many believe that cryptocurrency needs to “breathe” to regain a value closer to reality. Indeed, at the height of its price, Bitcoin was selling for between 2 to 4 times more expensive compared to its cost of production. Today it is negotiated around its manufacturing price.
Changpeng Zhao, founder of Biannce, one of the biggest crypto exchanges, was the first to estimate that Bitcoin needs time to rise again:
“I think given the price drop, it’s going to take some time to get back to the $69,000 level. explained the CEO of Binance in an interview with the English newspaper The Guardian.
He also added that it would take “a few months or even a couple of years” for the Bitcoin price to come back up. Several technical indicators support his words, including one that has demonstrated its importance in the past.
The Bitcoin Halving
About every four years, an important event takes place for the community of Bitcoin miners: it is the Halving. Bitcoin has experienced 3 halvings since its creation in 2008, the last of which dates back to May 2020, at the start of the rise that took it to €68,000.
Halving means halving in English, and as its name suggests, every four years the protocol written in the bitcoin code halves the rewards awarded to miners.
As you know, to work, the Bitcoin blockchain needs computing power. As a result, it encourages miners by paying them for each mined block. It was Satoshi Nakamoto, the inventor of Bitcoin, who initially set the rewards given to miners.
In 2008, the gain from mining a block was 50 bitcoins (which represents approximately 1 million euros at current prices). After the first halving in 2012 the reward increased to 25 bitcoins per block and so on…
Why is the halving so important for Bitcoin?
As one progresses, the remunerations are lower, creating an increasingly consequent scarcity phenomenon around Bitcoin. This automated protocol also makes it possible to ensure a healthy circulation of cryptocurrency by guaranteeing that the price of it does not collapse because of too massive an offer.
Currently the circulating supply is 19 million Bitcoins. Similar to gold, bitcoin has a coin limit of 21 million bitcoins.
By halving its issuance every four years, it is estimated that Bitcoin will have to wait until 2140 to unlock its 21 million coins. Once the limit is reached, in theory no one will be able to create another bitcoin. This whole process is about cultivating a scarcity around the digital token.
As of 2020, bitcoin miners are known to receive 6.25 BTC for each new block. In the next halving in 2024, the remuneration will increase to 3.125 bitcoins.
Impossible to know if Bitcoin will go back to its highest one day, it may very well end its run here. Nevertheless, several investors believe that in 2024 the halving could work in favor of their investment since it conditions the supply and therefore plays on the scarcity of bitcoin (generally scarcity generates strong demand)…