What is a bitcoin halving?
Disclosure: Author holds an investment in bitcoin. On May 20, , an event will take place that could change the value of bitcoin forever. Unlike fiat currencies, which can be printed by central banks at will, the supply of bitcoin is limited algorithmically. There will only ever be 21 million bitcoins in existence. This, by definition, makes it a deflationary asset, as opposed to an inflationary one.
This is complicated and expensive work, demanding a lot of electricity and specialized hardware. So why would anyone do it in the first place? Because the algorithm rewards miners with new bitcoins, which are generated and added to the circulating supply every 10 minutes.
When bitcoin first appeared, the block reward was 50 BTC. This means that every 10 minutes, somebody, somewhere, was getting 50 bitcoins delivered to their wallet. This was back in the days when BTC was worth pennies and you could mine it using only a laptop. So does this mean money is basically falling from the sky on those people running giant warehouse-sized mining rigs? Currently, the block reward is only What happened? The block reward was cut in half — twice.
This is a feature programmed into bitcoin, and occurs every four years , blocks. Once that number is crossed, the block reward is cut in half. The block reward halving tends to have long-term positive effects on the price of bitcoin. Why does this happen? There are a lot of theories, but one common one comes down to simple supply and demand: If fewer bitcoins are being generated, the newly increased scarcity automatically makes them more valuable.
For a more nuanced explanation of why halvings correlate with eventual price changes, one needs to examine the role of miners. On average, 4, blocks are mined each month and added to the bitcoin blockchain. As of this writing, the block reward is Crunching the numbers shows that 4, x This is approximately how much in dollars miners are earning each month in total revenue.
After the next halving, only half as many BTC will be generated per day. So how has this played out in the past? History shows us that it ends up being a mix of both. Some small number of miners will indeed give up, while the majority will instead choose to keep mining and hold.
The next halving occurred July 9, This time, some in the industry anticipate that history might repeat itself. So what about the next halving? With the first, it was the first time a halving ever happened, and no one had any real idea what to expect.
The second time, the rise of Ethereum and initial coin offerings was a new factor that was not happening in The biggest changes in the crypto ecosystem this time around will be the higher public awareness around bitcoin and the interest of institutional investors.
If financial institutions begin taking big positions, it could affect bitcoin in ways investors have never seen before. These supply side changes happen every 4 years, and keeping that in mind can help build a better picture of what influences the price of bitcoin at different times. The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation. This process is predetermined and will continue until the last bitcoin is mined sometime in the year Opinions expressed are those of the author.
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The Growing Global Impact of Bitcoin
At the end of Decemberthe very first bitcoin futures contracts were launched after the leading cryptocurrency had experienced a year of massive growth. Since then various other exchanges have started to offer bitcoin futures, while CFD bitcoin trading has become another popular option for traders. There has been a lot of speculation regarding a potential bitcoin crash and controversy around the cryptocurrency. Futures and CFD trading offers a somewhat less risky trading option and the introduction of these has had a wider impact on the financial market. More investors poured money into the cryptocurrency as it was surrounded by a lot of hype and it was around a similar time that bitcoin futures trading was introduced.
Why halving could cause another spike.
Bitcoin price has been volatile since the start of this year but the latest hack may have damaged faith in the cryptocurrency even further. The hack has not only exposed the security of the entire cryptocurrency markets, it has also raised concerns about regulatory requirements. The agency has also ordered Coincheck to improve security measures. The broader sell-off was observed throughout Monday trade, thanks to additional concerns related to Tether. As a result, trader concerns have now been raised over whether Tether has artificially raised their value, which they said had been backed by the dollars. Featured Image: twitter. Will You Seize Crypto Wealth?
When is the next bitcoin halving?
The highly anticipated hqving reward halving of bitcoin is set to occur in May Despite popular belief, Morgan Creek Digital co-founder and partner Jason Williams said that it would have a minimal impact on the bitcoin price. Halving unlikely to have immediate impact on bitcoin price source: Jason Williams Twitter.
A block reward halving is a mechanism that is activated once every four years on the Bitcoin network that reduces the rate in which new BTC is mined. Theoretically, halvings should eventually lead to an increase in the price of bitcoinas less BTC flows into what is the price impact of bitcoin having market approaching its whwt million cap. However, because halvings are anticipated years in advance by both investors and miners, whether bitcoin prices in halvings prior to the events occur remains unclear.
In an interview, Williams said that the cryptocurrency community is well aware of the date of the next halving and that miners pricee to prepare before a halving occurs. As such, he noted that the upcoming halving will not have any major effect on the price trend of bitcoin.
They even know the date within a few days. Large miners that are holding BTC will have to sell to cover operational havjng or use cash as revenue halves. New buyers have to si in to move this market up. So other than a new headline, the halving is being dealt with now by those who are operationally effected by it.
In previous halvings that occured in November and Julyit took well over a year for the market to start surging in both instances. It wasn't until December that the bitcoin market started to engage in an extended rally. Still, some reports indicate that new investors are generally unaware of bitcoin halvings, which could be a variable as halving nears.
Grayscale, an investment firm under Digital Currency Group that operates the Bitcoin Investment Trust GBTCsaid in a report that many of the market participants it interviewed had no knowledge of halvings.
In fact, based whar anecdotal conversations with market participants, we were surprised to learn that many whar them were not even aware of this event," the report read. As a scarce asset with a fixed supply at 21 million BTC, a block reward halving that affects the supply of bitcoin is likely to influence the price.
But, based on previous halvings, it may be far-fetched to claim that halvings trigger immediate price reactions and strong rallies in the short-term. I'm a financial analyst and investor who has worked in the cryptocurrency and technology sector since I've worked with leading publications prjce the cryptocurren Share to facebook Share click the following article twitter Share to linkedin.
Halving unlikely to have immediate impact on bitcoin price source: Jason Williams Twitter Twitter. Joseph Young. Read Fo.
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Learn. These supply side changes happen every 4 years, us keeping that in mind can help build a better picture of what influences the price of bitcoin at different times. Because previous halvings have triggered bull runs. What happens when all 21 million bitcoins have been mined? They even know the date within a few days. Inflation is a model where central banks can print extra lmpact of currency at. Some small number of miners will indeed give up, while the majority will instead choose to keep mining and hold. Even so, this would not be the only head-spinning feature of the crypto markets over the coming months. This is complicated and expensive work, demanding a lot of electricity and specialized hardware. The biggest changes in the crypto ecosystem this time around will be the higher public awareness around bitcoin and the interest of institutional investors. The second halving took place in July Because the halving is much more than an event — it is also a narrative, and an uncertain one at. Large miners that are holding BTC will have to sell to cover operational expenses or use cash as revenue halves. The market is relatively efficient in terms of information distribution, the argument goes, so smart investors would obviously have incorporated the supply impacr into their models and taken positions accordingly. Year in Review A similar pattern emerged surrounding the what is the price impact of bitcoin having halving on 28 November when the bitcoin block reward dropped from 50 to 25 new bitcoins. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.