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The following article originally appeared in Institutional Crypto by CoinDesk, a weekly newsletter focused on institutional investment in crypto assets. Sign up for free here. Because the halving is much more than an event — it is also a narrative, and an uncertain one at that.
The rate at which they are created is reduced by half every four years, ostensibly to mimic the increased difficulty of gold mining. On Nov. The next reduction, after which the network incentives will be 6. The above chart shows that the price represented by the light blue line started moving up before each of the previous halvings, and continued for some time after.
Yet the data set is limited — the market has only experienced two of these events, and it could be a stretch to assume that the pattern will repeat itself. Even assuming investment growth remains constant, the reduction in selling pressure after the halving with fewer new coins hitting the market would lead to a price boost. Pseudonymous trader Plan B has gone a step further and used the stock-to-flow S2F ratio — which divides current inventory by annual production — to create a model that retroactively predicts past price movements for bitcoin with a high degree of accuracy, using gold and silver as benchmarks.
While this model has its critics , it has undergone rigorous cross-examination , and it seems that the regression holds up. It also makes intuitive sense: a reduction in supply should enhance value, all else being equal. We can hope that facts themselves are not open to interpretation, but their impact almost always is. No one doubts the halving will happen — yet the narrative around its influence is not clear. That was it. The market is relatively efficient in terms of information distribution, the argument goes, so smart investors would obviously have incorporated the supply adjustment into their models and taken positions accordingly.
The bitcoin ecosystem today is arguably very different from previous halvings: four years ago, crypto derivatives markets were in their infancy, institutional involvement was slim and valuation frameworks were practically non-existent. True, this could be offset by a price increase, but if that turns out to not be proportional, increased network centralization could trigger concerns about security. Also, in traditional markets, price is rarely a function of supply. In the absence of an established and widespread fundamental use case for now , demand in crypto markets is narrative-driven.
Yet in recursive logic, demand could be affected by the halving narrative. We could end up with the head-spinning cycle of narrative influencing price, and price influencing narrative.
Even so, this would not be the only head-spinning feature of the crypto markets over the coming months. If this leads to more inflows at a time when new supply falls, the charts that predict a post-halving rally will turn out to have been right all along. Sophisticated investors will no doubt both welcome these and treat the underlying assumptions with a healthy dose of skepticism. Disclosure: the author holds small amounts of bitcoin and ether, with no short positions.
The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. Because previous halvings have triggered bull runs. What and why First, a review of what the halving is and why it happens. This is where narrative comes in.
Bull run ahead? Read more about Prices Bitcoin News Halving Markets. Disclosure Read More The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies.
Year in Review
Bitcoin saw massive growth after the 2016 halving.
Much has changed for Bitcoin, cryptocurrency and blockchain since the last Bitcoin halving something the community calls a halvening , which happened July 9, , and each time it happens no one is entirely sure how the Bitcoin price, or the economy that has built up around it, will react. A Bitcoin halvening — there have been two since Bitcoin's creation in — is a fixed event and will occur after every , blocks are mined, or confirmed, by the system. The Bitcoin price has spiked after both of the first two halvening events. While the Bitcoin price has climbed somewhat ahead of both subsequent halving events, the price has gone on to boom in the subsequent 12 or so months. Many Bitcoin and financial experts think this is similar to the way traditional markets price in changes to interest rates or changes to commodity supply. If the market knows the supply is due to be reduced at a certain time, and by what it will be reduced by, it will begin applying that reduction to the price gradually — avoiding sharp spikes and dips. The rise in price makes sense in so far as large buyers of Bitcoins have to either buy on the market or get them through mining, and after a halving event it forces more people to buy on the market. Thorsten Koeppl, professor of economics at Queen's University in Canada, said: "It appears to us, any cryptocurrency should economically do the opposite of what Bitcoin is doing.
Why Do Miners Get New Bitcoins?
Why a means of limiting the supply of Bitcoin at any btcoin time is required. The concept of Bitcoin mining was whats a halveing event bitcoin to put this in action.
Before we can even attempt to understand Bitcoin halving, it is important for us to dissect Bitcoin mining and what it entails. Whats a halveing event bitcoin whts, because it comprises chains of blocks, is referred to as a Blockchain. These miners ensure that the blockchain is uniform throughout, up to date, and immutable. In return, these miners are offered a certain amount of newly created coins. Satoshi Nakamoto in his really sophisticated code programmed the Bitcoin such that after two hundred and ten thousandcompleted blocks, the amount of new Bitcoins created is halved.
In when Bitcoin was newly launched, whats a halveing event bitcoin reward for miners was capped at 50 Bitcoins per block. In Novemberafter almost four years, the reward reduced by half to 25 Bitcoins per block.
This period was officially known as the second reward era. Bitcoin halving schedule is such that every four years, the event occurs.
Even though Bitcoin halving occurs afterblocks have been completed, it is possible to estimate an arbitrary date. The third reward era of Bitcoin mining occurred in July nitcoin the reward for miners was reduced to This will continue for years until the bittcoin when all the 21 mln Bitcoins in store have been exhausted. This is a very important question to ask, especially for miners.
A perfect illustration is a monetary supply governing the distribution of fiat currencies in central banks. A new Bitcoin is created based on certain features of the currency which are pre-programmed into the. With a fiat currency, there are various factors involved. One major discrepancy is the consideration given to debt, inflation, and other factors.
Considering the fact that many of these miners rely solely on the reward they get, further Bitcoin halving might have less than desirable effects. One major reason for this is the rigidity of Bitcoin and the maximum allowable coins in circulation. Adding these new blocks at a reduced price without a concomitant increase in the transaction fees or the value of Bitcoin they earn might cause bankruptcy.
Within a short while, the competition will become fierce and transactions will take more time. In the event where miners do not shut down out of lack of activity, we can expect the scarcity to engineer an increase in the price of Bitcoins.
Some companies are already feeling the brunt of Bitcoin halving. InKNC Miner, a Bitcoin mining company in Sweden, declared bankruptcy and their major reason was the imminent Bitcoin halving event. Another report declared that about 25 percent of mining rigs will be affected by the net halving event.
Presently, miners are rewarded with about Sometime in Maythe next Bitcoin halving event will occur and this halvenig cause the reward to further reduce to 6.
The hash rate is the speed at which a computer completes a transaction in the blockchain network. Before the last Bitcoin halving, the hash rate was estimated to be 1. This is due to the fact that some older equipment which is no longer seen as profitable will leave the network vitcoin this will, in turn, result in a decline in the network hash rate. The law of demand and supply will set in, correcting the previous fallacy and the new purchase will not negatively impact the currency. It will not take long for us to come up with justifications for the increase in price and adoption and this is not unexpected.
Also, the Bitcoin halving schedule can be estimated based on the four-year rule. George Shnurenko is a Bitcoin and cryptocurrency enthusiast, financial analyst and writer. Disclaimer: The opinion expressed here is not investment advice — it is provided for whats a halveing event bitcoin purposes.
It does not necessarily reflect the opinion of U. Every investment and all trading involves risk, so you should always perform your own research prior to making decisions. We do not recommend investing money you cannot afford to lose.
Since one of the explanations of the recent Bitcoin price decline was a dump of BTC on the market by the South Korean PlusToken Ponzi scheme, some in the community now fear that the already bitcpin ETH price may start dropping further.
Recently, as reported by U. Todaythe crypto expert Jacob Canfield shared some screenshots from the Whale Alert Twitter page, showing large BTC transactions and saying this was likely to be PlusToken sending their stolen-from-customers Bitcoin to crypto exchanges.
Technical analysis, he tweeted, is not very reliable when a Bitcoin scam, such as PlusToken, is dumping on the market. Yuri is a journalist interested in technology and technical innovations. He has been in crypto since Believes that blockchain and cryptocurrencies have a potential to transform the world in whats a halveing event bitcoin future. Has written for several crypto media. Currently is a this web page writer at U.
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Tim Draper predicts the price of bitcoin after the halving!
BITCOIN PRICE AND INFLATION:
Disclosure: Author holds an investment in whatz. Miners essentially prove that they have skin in the game by trying to solve the puzzle that goes along with each new block of transactions. Kenny Li. How to trade bitcoin. BTC generated each day The current block reward is only It is intended to be a competitor to Ethereum. Contracts for difference is a popular way to speculate on bitcoin price movements because they enable you to go long or short. Add a Symbol. The bitcoin halving makes sure that not only will the rampant production of new but coins never happen, but in fact, it is mathematically required that the whast should occur. You can store hundreds of different cryptocurrencies using encrypted Ledger Wallets.
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