Why is crypto currency on the rise again? | by Meghan Kachhi | Dec, 2023

Image Source: https://www.bankrate.com/investing/what-is-bitcoin-mining/

Rewind back to late 2010s and early 2020s when people across the globe were talking about one thing in common — Crypto currency & Web 3.0. Now that the latter has been become more of a theory on paper, the former — crypto has been still everyone’s mind for the longest time as not necessarily a currency alternative but more of an investment option to fight against the inflation.

The question is though why after downturn of 2022 market crash, is it recovering?

The recent crypto rally is fueled by several factors, with the main contributors being:

Regulatory clarity: Governments are starting to provide clearer regulations for crypto trading and activity, which is instilling more confidence among both retail and institutional investors. This increased clarity reduces uncertainty and encourages investment.

Bitcoin’s potential as a hedge against inflation: With inflation remaining high, some investors are turning to Bitcoin as a hedge against its negative effects. The perception of Bitcoin as a limited-supply digital asset makes it appealing in an inflationary environment.

Bitcoin Halving: Bitcoin halving is a pre-programmed event occurring roughly every four years, where the reward for mining new Bitcoins is cut in half. This event aims to control inflation and ensure the long-term sustainability of Bitcoin.

Every 210,000 blocks mined, the reward for miners is automatically halved. Currently, it’s 6.25 BTC per block; after the next halving in 2024, it will be 3.125 BTC. This halving process plays a crucial role in Bitcoin’s long-term success by:

Controlling inflation: By reducing new Bitcoins, it helps keep inflation in check.
Increasing scarcity: Fewer new Bitcoins make existing ones relatively scarcer, potentially leading to higher demand and value.
Maintaining network security: Mining rewards incentivize miners to maintain the network’s security. Halving ensures this incentive remains strong.

With that, cryptocurrencies offer the potential for high returns, censorship-resistant transactions, and a hedge against inflation but at the same time succumb to highly volatile market and is prone to sudden swings.

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