Key Points
Bitcoin has undergone four halvings since its inception in 2009.
The next halving, scheduled for 2028, will make it even harder to mine Bitcoin.
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Bitcoin (CRYPTO: BTC), the world's most valuable cryptocurrency, is often valued by its scarcity because it's mined with the energy-intensive proof-of-work (PoW) consensus mechanism. By using powerful computers, miners solve cryptographic puzzles to earn Bitcoins as rewards.
When Bitcoin was created in 2009, it could be mined with simple CPUs. But every four years (after 210,000 blocks were mined), the mining rewards were cut in half through a scheduled "halving" to make it more difficult to mine Bitcoin for profit. To keep up with those halvings, Bitcoin miners shifted from CPUs to GPUs to application-specific integrated circuits (ASICs). Today, those miners can only profitably mine Bitcoins with powerful ASIC miners.
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Bitcoin has already undergone four halvings (2012, 2016, 2020, and 2024) and will be halved again in 2028. Should you buy the top cryptocurrency before its mining difficulty increases?
Bitcoin's bull and bear case
Bitcoin has a maximum supply of 21 million tokens, and more than 20 million of them have already been mined. However, the last Bitcoin won't be mined until 2140.
So just like gold, Bitcoin can be valued by its mining difficulty and finite supply. The bulls expect it to become a viable alternative to gold, silver, and other hard commodities as expansionary monetary policies erode the value of fiat currencies -- like the U.S. dollar -- over the long term. The launch of its first spot price ETFs in early 2024 could also make it easier for both retail and institutional investors to increase their exposure to Bitcoin without buying the actual tokens.
The bears argue that Bitcoin will struggle to stay relevant against other digital alternatives -- including gold-backed cryptocurrencies like PAX Gold (CRYPTO: PAXG), developer-oriented cryptocurrencies like Ethereum (CRYPTO: ETH), and stablecoins pegged to the U.S. dollar. Quantum computers, which are becoming more scalable every year, could eventually crack Bitcoin's cryptographic puzzles ahead of schedule -- making it much less attractive than physical assets like gold and silver.
Bitcoin has also struggled to break away from the broader crypto market and other speculative assets. As a result, macro headwinds continue to drive investors away from Bitcoin rather than toward it as a safe-haven asset. Unless that trend reverses, its scheduled halvings are unlikely to have much direct impact on its near-term price fluctuations.
Should you buy Bitcoin before 2028?
I believe Bitcoin has a brighter future than most other smaller cryptocurrencies, since it's the world's most widely recognized token and is attracting plenty of retail, institutional, and government-backed investors. I wouldn't consider Bitcoin's next halving to be a hard deadline for buying it, but it could be smart to gradually accumulate the token over the next two years.
Should you buy stock in Bitcoin right now?
Before you buy stock in Bitcoin, consider this:
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Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
