When bitcoin came into existence, the bitcoin network issued 50 bitcoins every 10 minutes. The first halving in 2012 reduced the number 25. In 2016, the halving cut down the bitcoins issued to 12.5 every 10 min. This month the much-anticipated third bitcoin halving is around the corner. Miners and traders wait with bated breaths, hoping the price will skyrocket with the decline from 12.5 to 6.25. Ideally, the decrease in supply increases demand. That’s the standard economic rule. If previous trends were to be considered, then this event is anticipated to cause bitcoin prices to surpass $500,000 in 2020. If you’re looking to uncover more about the emerging trends in the bitcoin industry, check out the latest bitcoin news now.
A Brief Overview of Bitcoin Halving
Nakamoto Satoshi, a person or group of people, no one knows for sure, created cryptocurrency in 2008. The total currency circulation is 21 million. After the amount is exhausted, miners will profit from transaction fees. Nakamoto set the system to automatically half every four years. The first halving was at 210,000 blocks in 2012. The 210,000 block interval is reached after every four years. It has been predicted that it will take 122 years for the last bitcoin to be mined, roughly in the year 2145. Halving provides a cap in bitcoin supply and adjusts the block reward.
Contrary to most people’s thought that there will be an increase in bitcoin price immediately after the halving, statistics indicate that the last two halving events led to a decrease in the amount of bitcoin before and after the halving. The spike in price was registered between 8-12 months after the fact. This year experts have predicted that bitcoin price could increase from the current price to $12,000 to $15,000 per bitcoin or even more. However, it will be ridiculous to expect an instant increase in the price based on previous statistics. Though the impact will be there, it will take time.
Bitcoin halving occurs at an interval of 210,000 blocks. This year the mining will occur on 630,000 blocks. Miners will spend the same amount of resources and time to mine half the number of bitcoin they are mining now. Since it’s unclear the specific time it takes for the prices to rise after halving, it only makes sense that miners will cushion themselves against going under. A theory suggests that miners accumulate bitcoin before the event so that they can finance the mining operation in the subsequent months. Mining corporations also accumulate capital to fund their activities when the prices are low after halving.
Since halving is aimed at ensuring scarcity of bitcoin and an increase in demand, miners that are not equipped to operate with the fall of prices after the halving will have to close their business because of the overhead expenses that will render mining cryptocurrency a loss. When the cost of electricity surpasses the gain in mining, the majority of small miners will have to stop temporarily and wait for the prices to rise.
Impact of Coronavirus on Bitcoin Halving
With the spread of coronavirus, most cities in the world have locked down, making it difficult for manufacturers to supply mining equipment around the globe. Even the production of this equipment has decreased. Large mining corporations depend on these improved equipment specifications to increase their computer power to mine more bitcoin. The delays might cause a slight effect in mining as the halving event approaches.
Enough Said, 2020 Halving May Be Different
This year it is becoming increasingly difficult to predict with precision the impact of halving. Unlike the previous years where traders were faced with tremendous challenges because of poor infrastructure, this year, things are looking up. In 2019, renowned custodians and established investors joined the bitcoin market, enhancing the coin’s infrastructure hence facilitating trade.
The 2020 halving event has been preceded with an efficient market infrastructure. That compounded with the balance between accredited investors and retail traders make this year’s halving attractive than before. Yet, it cannot be predicted with certainty the degree to which the halving will affect the market prices as the economic atmosphere is different from the previous years.
Be the Judge
Bitcoin halving has triggered a lot of debate from the industry experts. The only way to tell how the halving will affect the bitcoin market is to stay put and wait for the halving. It’s only a matter of days. In three to four months, you will have proven your theory.