What are the consequences of a halving?

The first consequence of a halving is quantitative. Half as many new BTCs arrive on the market every 10 minutes.

In theory, halving triggers a chain reaction that goes like this:

The BTC reward when mining a new block is divided by 2;

BTC inflation halved;

The new available offer is reduced;

Demand for BTC is growing*;

The price of BTC increases*;

The incentive for miners is maintained even if they receive 2 times less BTC for them, because the price of Bitcoin increases*.

*Please note, this is a scenario that has played out in the past, but this in no way indicates that future halvings will bring the same fate to Bitcoin. Macroeconomic events taking place in parallel with a halving could completely cancel out the positive impact on the price of Bitcoin.

This interpretation proved true during the first two halvings of Bitcoin. You can see in the chart below that each halving was followed by an upward trend in the price of Bitcoin:

Historical cycles of the Bitcoin price based on halvings

Another consequence of a halving is qualitative. Following a halving, the hashrate, that is to say the computing power of a blockchain, may be affected. This indicator makes it possible to estimate the computing power that miners must provide to validate transactions and, in return, benefit from rewards.

A drop in hashrate is synonymous with a drop in blockchain security. When the hashrate decreases, the resources required to validate transactions are fewer. This phenomenon therefore naturally attracts new miners who want to take advantage of these more accessible rewards.

The arrival of these new miners in turn leads to an increase in the hashrate. Thus, an adjustment period is necessary to find a balance between prices#zapparro #HalvingHorizons