Cathie Wood's Insight About How Bitcoin's 2024 Halving Could Transform the Cryptocurrency Landscape

The upcoming halving of mining rewards in the Bitcoin network is distinguishable from its predecessors, as noted by Cathie Wood, the visionary behind Ark Invest. 

Source: siamblockchain.com

In a recent video interview with Yassine Elmandjra, Ark Invest's director of digital assets, Wood highlighted a pivotal aspect of Bitcoin's forthcoming halving that hasn't received much attention. This fundamental update sets it apart from the initial three halvings. Wood revealed that the rate of growth in Bitcoin's supply is poised to be halved to just under 1% per year. This represents a significant shift as, in comparison, the annual growth rate of the gold supply has averaged roughly 1%. The impending reduction in Bitcoin's supply growth is anticipated to fall below that of gold. This nuanced detail could be a game-changer for the cryptocurrency market. 

Why Is This Realization So Crucial?

It harks back to the well-known concept that prices in a free market are a reflection of the equilibrium between supply and demand. Traditionally, gold has been esteemed as an excellent store of value due to its constrained supply and relatively sluggish rate of new production. However, a noteworthy shift is on the horizon: for the first time, Bitcoin's rate of supply growth will suddenly dip below the inflation rate of gold.

The Bitcoin whitepaper, which outlines the workings of this cryptocurrency, notes that the steady addition of a constant amount of new coins is analogous to gold miners expending resources to add gold to circulation. In our case, it is CPU time and electricity that are expended. Thus, the self-proclaimed open-source peer-to-peer money or digital gold is poised to fulfill the role for which it was initially designed. This certainly appears to be a groundbreaking development.

The Gold-Like Reliability of Bitcoin

The restricted supply of Bitcoin is widely known, with its capped limit of 21 million digital coins often cited as a key reason to invest in this digital embodiment of long-term stability. Currently, 19.6 million of these tokens have already been mined, leaving less than 7% of the total supply for future mining endeavors. The scheduled halving of mining rewards approximately every four years will further slow down the rate of Bitcoin growth in 2029, 2033, and beyond. The final Bitcoin is projected to be mined around the year 2140, after which mining rewards will solely consist of transaction fees.

This extensive and enduring plan is embedded into Bitcoin's software. Altering these growth-limiting parameters would necessitate an overwhelming consensus among supply-side stakeholders. This scenario seems unlikely, especially if Bitcoin indeed transforms into a widespread digital alternative to gold.

The Effects Of The Upcoming Halving of Bitcoin

Historically, Bitcoin's halving events have consistently preceded substantial increases in the cryptocurrency's value. For instance, during the initial reward cut in 2012, one Bitcoin was valued at $12. Within a year, the price soared to a peak of $1,170 before experiencing a decline. 

The 2016 halving saw Bitcoin prices surge from $640 to $19,650 over a span of 17 months. The most recent reduction in mining rewards occurred in May 2020, with Bitcoin priced at $8,600. Within 18 months, this price cycle reached a peak at $67,500. While it's essential to note that past performance does not guarantee future results, Bitcoin appears to defy this conventional wisdom in certain respects.

Disclaimer: FameEX makes no representations on the accuracy or suitability of any official statements made by the exchange regarding the data in this area or any related financial advice.