Bitcoin Halving 2024: Next Bitcoin Halving | Trust Machines

It’s important to remember that it takes two to tango. Miners are incentivized to secure the network by earning Bitcoin block rewards and fees, presuming that they appreciate in value. Investors are incentivized by profitable price behavior (long or short).

So how does Bitcoin halving impact the two? 

Bitcoin halvings help maintain scarcity by slowing down the distribution of new coins into circulation, which could preserve Bitcoin’s value. It can also stabilize prices by reducing miners’ sell-side pressure and encourage mining operators to sustain profits by bringing innovative solutions and increasing efficiency. Historically, a positive relationship has existed between price action leading up to and following a bitcoin halving. Additionally, it can improve network security due to the increased difficulty of a 51% attack. These are some benefits that could attract more investors and increase demand.

However, Bitcoin halving could have some downsides. Several examples include reducing block rewards and unpredictable energy costs, which could affect miner profitability. If the cost to operate exceeds the incentives, it could result in more undersized mining operators exiting the network, increasing mining centralization. This can be exacerbated if bitcoin fees need to be more substantial to incentivize miners. Also, unintended consequences could be difficult to predict, like a sudden drop in network hash power that could make the network more vulnerable to attacks.