Bitcoin: The launch of its price, the milestone of April 18 and prospects for the next 116 years

Along with its price launch – (to $71,000), the international debate on its prospects has also been launched. Halving is currently the key word on their stage, according to Handelsblatt. It refers to a significant (for the development of its price) change in Bitcoin software that is scheduled to take place every four years – and will be finalised in a few weeks. Bitcoin is treated with suspicion by many money professionals. Legendary investor Warren Buffett once described them as “ponic medicine on the block” – does not have the financial basis for cryptocurrencies. With companies, it is used to assess cash flows and debt levels and draw conclusions on the future share price. That’s not possible with Bitcoin. “With cryptocurrency as a whole, I can say with great certainty that they will have a bad ending,” Buffett certified in 2018. But price increases show: Bitcoin is back. After peaking in late 2021, the krypton coin lost a great value in the meantime. But now his honor has surpassed even the high of that time. For a time, the rise was explained by the start of the Bitcoin funds trading, or ETFs, a few weeks ago. This means that any amateur investor can now easily buy tokens, which stimulates demand for Bitcoin. However, the upcoming reduction in half could give even greater impetus to the price. So what exactly is going on? 1. What is Bitcoin? Bitcoin is based on blockchain technology, which goes back to Satoshi Nakamoto (Satoshi Nakamoto). His exact identity has never been revealed, although many speculations have been made over the years. It could also be a group of developers, according to some Bitcoin experts. Bitcoin is the most known krypton coin. In simple terms, Bitcoin is based on a decentralised database. This so-called blockchain chain stores coins decentralised in digital wallets. Bitcoin is created by computers that solve computing tasks in the block chain. These tasks are becoming increasingly difficult the more coins “extracted”, as experts call it. A total of 21 million coins can be created. This limited quantity also means that individual digital coins become more expensive. It is like gold, for example: it is a rare commodity and the greater its demand, the higher its price. Currently, “carbon miners” receive 6,25 Bitcoin for every successful “mining effort”. With the reduction in half, this reward will be reduced to 3.125 Bitcoin. 2. Why is there a halve reduction? In the case of gold, the natural rarity of metal determines its value. With Bitcoin, the calculation formula determines the rarity: It ensures that there are never more than 21 million coins. Halving is used to ensure that ‘mining’ remains possible and that not all Bitcoin is taken at once. The closer the number of coins to the ceiling, the slower the new Bitcoin is produced, because the incentive from the price is lower. According to data from the Coinmarketcap service, a total of 19,672.281 coins had been produced by noon last Thursday (7.3.24). The integrated mechanism aims to guarantee the independence of crypto-currency. With Bitcoin, mathematics runs—no head central bank or president can require more coins to be created. Satosi Nakamoto compared the process to the Bitcoin manifesto with gold mining. “The constant offering of a fixed quantity of tokens corresponds to the attempt of a gold digger to bring more and more gold into circulation with increasing resources. In our case, this corresponds to more computing power and electricity.” 3. When is the next reduction planned in half? According to Nakamoto’s type, halving takes place about every four years. The next halving could take place on April 18, although the exact date may change slightly. When Nakamoto started the Bitcoin block chain in January 2009, the “carbon miners” received 50 Bitcoin as a reward. In 2012, the reward was reduced to half to 25 Bitcoin and in 2016 it was reduced from 25 to 12.5 Bitcoin. The last reduction in half took place in May 2020, since then there are 6,25 Bitcoin. 4. What are the consequences of halving for coal miners? Every time the reward decreases to half, the mining business model is massively affected. This is because it is becoming increasingly difficult to produce new Bitcoin. Turnover from this sector will be reduced to half immediately after halving, DZ Bank analyst Marcel Heinrichsmeier says. This increases the pressure on miners to increase their competitiveness. Oliver Eckhard, co-founder and head of investments in the cryptographic hedge fund Protocap, assumes that not all miners will survive halving, especially those with high energy costs, old computers and lack of funds. “Some less effective players could fail”. But Eckhard is overall optimistic. The “carbon miners” have faced the reduction in pay in half several times in the past. The resulting economic pressure “forced them to become more efficient and reduce costs,” says the encryption expert. This was made possible, among other things, thanks to special computer chips and lower energy costs. André Dragosch, head of research at the ETC Group encryption editor, refers to Moore’s law. “He stipulates that semiconductor efficiency doubles every two years”. This means that the computational power of miners is doubled. “Thanks to the new material, they require less energy for the same computational power,” Drakos says. This also ensures that several miners remain competitive and that the decentralisation of the mining industry continues. 5. What does this mean for the price of Bitcoin? Historically, 365 days ago and after a reduction in half have often been associated with significant price increases, as evidence from the services of the Coindesk and Coin Metrics branch shows. For example, the price was ejected by 559% the year following the most recent halving in 2020. A year after the first halving in 2013, price gains even exceeded 8,000%. Of course, there is no guarantee of price increases. Attention is also recommended when we look at the past: when Bitcoin began negotiating in early 2009, its price was initially less than one cent. With smaller amounts, it is easier to obtain sharply percentage price gains. Nevertheless, many investors look forward to halving. After all, miners can no longer bring to the market as much Bitcoin as they could before cutting their pay to half. This means that “a team of the most consistent sellers” is no longer available, Eckhardt says from Protocap. Mining is energy-intensive and cost-effective and miners need money to finance their operating costs. The hope of Bitcoin fans is now: The reduced supply meets increased demand, especially from long-term investors. They point out the ETFs approved in the US a few weeks ago. On 1 March, the index funds already held 776,000 Bitcoin. By comparison, all “carbon miners” produced 337,000 new Bitcoin in 2023. “This means that the increase in supply per year so far has not even met the demand of ETFs for two months,” says investment chief Eckhard. The rest must be covered by willing sellers. However, in particular long-term Bitcoin holders are aware of this dynamic, ‘so their appetite for sale is limited’. Tom Lee from Fundstrat analysis company also sees it this way. He assumes that Bitcoin will rise to $150,000 by the end of the year. Nevertheless, cryptocurrency is known for its variability. According to analysts, short-term retreats are therefore quite likely, as happened last Tuesday (5.3.2024). Bitcoin initially reached a new high $69,171 and then retreated by 14% within a few hours – to recover ever since. Half reduction is becoming less and less important for Bitcoin procurement The last Bitcoin will likely be mined in 2,140. Until then, there are 29 more halves. But with each halve reduction, the effect on supply weakens. In fact, more than 93% of the maximum possible 20. 999. 999 bitcoin are in circulation. In other words, the reduction by half of April is one of the last half that significantly reduces the Bitcoin offer. Jeff Miller also hopes for the result. Last Tuesday’s course correction didn’t make the programmer change his mind. “The cryptocurrencies have always been unstable,” he says. “I’ve gone through completely different fluctuations”.