“At the stroke of the midnight hour, when the world sleeps, India will awake to life and freedom”
Wait, what? If you are a normie your Saturday would have sucked as much as the rest of your days. However, for your crypto bro next door, today is no less than a festival. They must be celebrating it as their ‘Financial Independence’
Yes. The highly anticipated halving has finally happened?
What’s next? And wtf is even halving? Well, allow me a moment.
The Quadrennial Supply Shock:
Tl;dr → New Bitcoin entering the world is going to be halved from today onwards.
Now let us dive a little deeper into how this works? I mean you could simply say ‘it’s magic’ at a dinner table conversation and no one’s gonna judge you (source: trust me bro)
But if you really want to dig in, here goes. Where is all this Bitcoin in the world coming from?
Well, it’s given as a reward to selected folks.
Why? Because unlike your lazy arse, these people are deploying massive compute power using electricity to make sure that network is generating accurate blocks. In other words, they are custodians of the network, who are making sure everything is in order.
Where do I apply to be one? Well, you need a GPU backed compute power, that’s it. You really don’t need anyone’s approval to become a ‘miner’ as they call these people.
Coming back to the topic, so everytime someone successfully mines a block, they are rewarded with Bitcoin.
But here’s the neat part. This reward gets halved every 210,000 blocks (roughly four years). We started with 50 BTC in 2008. Do some math for a change and you’ll figure out that in 2024, we are down to 3.125 BTC per block.
Also, extrapolate it to many years in the future, with total supply of Bitcoin being 21M, this game ends in 2150 when all the Bitcoin to ever exist will be mined.
Supply Cut, Demand Robust:
Okay. One obvious question that pops up here is how does all of this impact me?
Let’s take an example of stocks. What happens when Tata Sons decide to buy back the shares of TCS?
The price surges because the total supply in the market has dropped.
Now imagine that with a caveat. This time Tata fam won’t be able to resell it in the market to increase the demand again.
That’s what’s happening with Bitcoin. An already scarce asset is now getting even harder to acquire.
So if you are a hodler, this might be a good news for you in the long run.
In the short run, Bitcoin has given an average drawdown of 30% after the halving.
Classic case of ‘selling the news’.
What’s Next?
I mean we won’t be writing profound profanity like the one you’re reading if we knew.
Come on, you are about to conclude a finance article. Do you really feel that?
If we were you, we would try to jump in and understand what the noise is all about.
Why every now and then, there’s a new animal coin giving 42069% returns?
And if you still choose to ignore, we ran out of fins to give long back ago.
Yup!
Because if there’s one gospel truth about this industry, it’s that, Bitcoin doesn’t care.
Tick tock, next block!
Until next time!
