Early in 2023, we saw an extraordinary rally, but continuous macroeconomic uncertainties and other factors have been affecting the price of Bitcoin (BTC – 1.65%)
Last August 16, Bitcoin started to go down, at one point losing more than 10%, marking the end of a long period of record volatility in history.
Everybody is familiar with these repetitive ups and downs of Bitcoin; therefore, the recent selloff is hardly surprising. The first thing we need to focus on is not projecting the likelihood of Bitcoin entering a new bull market, but getting deeper to figure out the features, and mechanisms of what makes Bitcoin unique and why it may currently represent a suitable moment for investors to include more Bitcoins to their wallets while it is traded under $30,000.
New hash rate record
Not having a single entity managing funds, that is, cryptocurrency is a decentralized network, Bitcoin holders must trust the fact that blockchain is reliable and safe. According to some current trends, said confidence should be higher than ever.
Recently hash rates achieved is highest pick in history and this translates to a strong security of the blockchain. This also is a sign that more and more miners are uniting Bitcoin networks through more modern equipment. Additionally, even though some ups and downs, it has grown progressively for a decade. This means that the integrity of the system is increasing.
Historical supply shortage
Halving is a remarkable feature; a mechanism added to Bitcoin’s its code.
A halving takes place every 210,000 blocks and is included in the blockchain. At present, a miner receives 6.25 bitcoins as a reward, but after eight months, the next halving will take place and decrease it to 3,125 bitcoins.
It is quite clear that the basic dynamics of supply and demand apply to Bitcoin due to the decreasing rate of growth in the supply of said blockchain. This means that if fewer bitcoins get to the market, and the demand stays minimum the same, prices should go up.
Having a new halving would be more than enough to benefit from Bitcoin’s recent fall. Nevertheless, data shows that the supply shock of this halving may be unlike any other in Bitcoin history owing to an additional element.
According to data, the amount of bitcoins on exchanges shows a reliable trend of increasing supply until March 2020. It was at that time when the supply peaked at almost 3.2 million coins. At 2.2 million, the number of coins available today is the same as it was in spring 2018. Bitcoin supply growth halving is the most practical explanation for the aforementioned.
Having the next halving scheduled for April 2024, the available supply of Bitcoin will likely face another shock and continue to decline. The real scarcity of Bitcoin, combined with the decreasing pace of supply growth, may see the price of Bitcoin pushed and pulled by supply and demand dynamics more than ever, making the recent drop by below $30,000 is a better opportunity to buy as investors remain focused on short term uncertainty.
By Leonardo Pérez
