What is a Halving and how does it affect the Cryptocurrencys market?

By lenonmc21 | Investment and education | 25 Apr 2020

One of the most important processes in the economic system of a cryptocurrency with a Proof of Work algorithm is the "Halving". Many have asked me what will happen to Bitcoin when the famous Halving takes place, and it's that it's actually a decisive process that marks the issuance of Bitcoin coins and therefore their deflationary state. This way, in this post, I intend to explain what will happen in May with the so-called Bitcoin Halving and how it will affect the crypt coin market.

What is a Halving?

Halving translates as an automatic event that occurs approximately every 4 years and that occurs just when the network has produced 210,000 blocks, in which the reward for mining a crypto currency is reduced by half and that in turn reduces its emission. This was created to encourage mining through PoW (Proof of Work), all because the amount of Bitcoins that can exist is finite and is set so that only 21 million Bitcoins are emitted, no more and no less, that's why BTC nicknames it as an active refuge with a deflationary state that in time will revalue.

Not like Fiat money, which has no control over issuance, but every time the Federal Reserve, in conjunction with the Central Bank of a country, decides to print a lot of money without any control, which results in more inflation and more debt, a situation that is currently happening mainly in countries like the United States.

Behind what is Halving, there is always a question mark, which is

When will the last Bitcoin be mined?

Answering this question is complicated, because it is quite difficult to predict. Bearing in mind that at the current capacity of the system, 12.5 new Bitcoins are produced every 10 minutes, which is proportional to 75 Bitcoins every hour, which, multiplied by 24 hours, would be 1800 new BTCs a day, we have another question mark for this, however:

How many are produced per year?

We simply multiply the 1800 BTC derived from one day by the 365 days of the year, and that gives us 657,000 new Bitcoins.

Assuming this to be true, we have that in about 6 years, the 21 million Bitcoins would be mined, not taking into account the time in which the reward for each mining block is halved by the "Halving", because, when this whole process we call mining started, for each block mined the reward was 50 Bitcoins and since the last two cuts that happened in the years 2012 and 2016, the reward went down to 12.5 BTC.

Taking into account this whole statistical scenario about production and the time that 21 million Bitcoins will be mined, it is estimated that by 2032 all existing Bitcoins will be mined by 99%; however, as the rate of production will gradually decrease, along with the difficulty of mining, it is speculated that it will not be until 2140 that I know that I will mine the last Bitcoin.

How does this event affect the Cryptocurrency market?

These actions have several drawbacks, which are:

In my previous publications, analyzing the Bitcoin in a fundamental way, I have commented that the whole market is susceptible to the movements that the Bitcoin has, that is, there is a lot of correlation of the altcoins with it, so depending on the movements that the Bitcoin makes, most if not all of them will follow the movement of the Bitcoin, either up or down.

Behavior of the Halving BTC:

However, taking this into account, every time the Bitcoin Halving has been carried out, the market's reaction is notorious, both in 2012 and 2016 have been bullish, so the greatest probability is that the market will react favorably to it. To give a little more detail, let's take a look at the following images I'll show, where we'll see how the price has behaved when Halving has taken place.

Conclusions

We are going through very difficult times due to the health crisis caused by Covid-19, this has caused the markets to be affected and in turn the economy itself, so we have to see the evolution of Bitcoin as a response to the current crisis and to show that it can be an asset refuge as is the case with Gold at the moment, in my opinion cryptomonies are the answer to many current economic problems, I think that Bitcoin does work as a safeguard and also as a deflationary asset.

This is my way of analyzing the situation that we may be about to see due to the Halving that is coming, I do it as a market analyst and also as an enthusiast, since the current monetary policies of the governments, printing money without any control, what it causes is a worsening of the economy, that no matter how much they manage to camouflage it at the moment, it will get out of hand for creating so much debt.

Finally, I would like to know in the comments what you think about how Bitcoin will react once the reward is reduced by half, so that we can count not only on my opinion but also on the opinion of many of you who also make life in this great community and thus determine what action to take to safeguard our funds.