What Is The Bitcoin Halving 2020: Does It Impact On Bitcoin Price?
If You are a crypto enthusiast or even take a passing interest in the cryptocurrency industry then You would have heard of the latest upcoming Bitcoin halving. There is no doubt that it is one of the most anticipated events of the crypto calendar in 2020. But what exactly is it?
What is the Bitcoin Halving?
Approximately in every 10 minutes, new Bitcoins are being generated by Bitcoin network, as a reward of adding a block (commonly called as Bitcoin mining). Initially, the reward was 50 Bitcoins, which has been reduced by half in nearly every 4 years to control the total supply of Bitcoin.
This ‘Once in 4 years’ event is called Bitcoin Halving. At the moment, the reward is 12.5 Bitcoins for adding a block and it is expected to be reduced to 6.25 Bitcoin on 12 May 2020. Next Bitcoin Halving will be happening on May 2024.
With this reduced supply design, the total amount of Bitcoin will be capped at 21,000,000. At the moment, 18,364,275 Bitcoins (87.4%) are being circulated. As the reward of mining is getting smaller, the scarcity of Bitcoin can increase in the future.
Why To Do A Bitcoin Halving?
Bitcoin’s supply is limited to 21 million units by its in-built algorithm. No more than that amount can ever exist ever!
Bitcoin operates on a deflation model. This means that, bit by bit, less and less Bitcoins will be released over time until then the supply stops completely. There are currently around 18 million BTC in circulation, which is approximately 85% of the total cap. The very last Bitcoin should be mined around the year 2140.
This is very different to fiat currencies, which use an inflationary model. Inflation is a model where a central bank can print extra currency at will – think quantitative easing which was brought in the global banking crisis, this is a practice that is often criticised and has historically led to some major economic problems. Nobody can randomly inflate Bitcoin’s supply even if they wanted to.
Limiting supply has also proved a good way to drive adoption. It has incentivised prospective adopters & forward thinking investors to buy Bitcoin before it runs out.
At heart the halving is a mechanism programmed into Bitcoin code that is designed to prevent inflation. It is designed to prevent miners mining all the Bitcoin too quickly and thereby throwing the supply-demand equation out of kilter.
Bitcoin Halving History
Let’s rewind a little and have a look at the first block mined in 2009 containing a reward of 50 BTC. Of course the Bitcoin was not worth as much at that time as it is now. A lot has changed in the following years as Bitcoin witnessed its first spikes in the price charts.
Image Source: ledger.com
So what is going to happen after this 2020 Bitcoin halving? Will it also have an impact on the price?
Does It Impact On Bitcoin Price?
In theory, Bitcoin halving has a long-term positive effect on Bitcoin’s price, as it reduces the amount of bitcoins coming into the market. Typically, miners sell a portion of their mining rewards on the market to cover operating costs and buy new equipment. Now, they’ll be receiving, on average, 50% less bitcoins to sell, which should lower Bitcoin selling pressure on the market.
The History also shows a price increase after this halving. The first halving took place on 28 November 2012, when one BTC was worth only $11. In the course of just a year after the event, Bitcoin’s price rose right up to $1,100. The second halving took place in July 2016. Bitcoin maintained a price of around $600 – $700 before increasing right up to $20,000 at the end of 2017.
Image Source: @ChartsBtc on Twitter
Investors and traders are doing all kinds of research to predict the future of Bitcoin and are creating beautiful charts to buy their Bitcoins at the right time. However, the cryptocurrency space is very different now though and much more mature, so the impact of the halving much more difficult to predict, no one can guarantee to have the right answer and it would be best to just do Your own research.
What Is The Bitcoin Halving 2020: Does It Impact On Bitcoin Price? – Education
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