I've seen many posts about the Bitcoin's halving and most of them lacked research or were just a long list of tweets, videos and opinions gathered from the world wide web. Bitcoin remains the top ranked cryptocurrency and the third block reward halving is set around the 12th of May 2020.
By now every crypto-investor, crypto-miner or crypto-random-guy know that the Bitcoin halving will take place in May 2020 and that the price may be affected after the process. But what does it mean for the Bitcoin miners and how Bitcoin will be affected in the long term?
The answer is simple, as the Bitcoin price can rise or drop anyway, depending on various factors such as volume of purchase, people panic selling and even global events such as the Covid-19 outbreak. Maybe the Bitcoin price will remain stable. Time will tell!
What "halving" means?
Let's compare bitcoin with an orange, and the mining process is the market you go to buy your fruits. What you are buying/mining now, will have half the value after the halving. The number of Bitcoins entering the market every ten minutes, known as block reward, will be halved from 12.5 to 6.25. As a direct result, the supply shrinks while the demand will stay as it is or will grow, due to Bitcoin becoming harder to mine. This can be a double-edge sword, as it will be less bitcoin to buy because the miners will gain less. The block reward halving a is scheduled every four years
In my opinion, the halving negative effect will happen many years from now, after several other halvings, when the block reward will be reduced to the point where will discourage all the miners.
What is the point of halving?
The state-issued currencies are kept in control by the central bank, which can add or remove currency from circulation, depending on the needs. Unlike classical currencies, Bitcoin supply is limited and written into the code shared across the network, summing a total of 21 million BTC. Bitcoin's scarcity is influencing the market value and price per unit, and this is the reason why the block reward is decreasing over time.
How the halving will influence the price?
Many believe that the halving will lead to a price increase but is no certainty about price movement, negative or positive. The only fact is that Bitcoin's block reward will be halved from 12.5 to 6.25
The price increase prediction is based on the previous two halvings, from 2012 and 2016. The first halving provided the first demonstration of how markets will be affected by a sudden decline in rewards. The price of Bitcoin began to rise after the halving
The second halving was highly anticipated, encouraging speculation about how the event would affect bitcoin's price. The price dropped by 10% on the day of the halving, down to $610, only to raise back to the previous value in few days. Was no evidence that the sudden reduction in bitcoin’s mining rate had a long-term impact on the price. The price gradually increased over the year following the halving, which may have been a delayed result of the halving. Being given the predictability of bitcoin’s halving schedule, the 1st halving process gave traders information on when the bitcoin block reward will decrease, giving them time to prepare, buy, mine or sell.
However, investors and Bitcoin holders are hoping that the price will rise a new all-time high
What will happen when the reward will become unattractive ?
The halving may become an issue when the reward will become unattractive because miners need an incentive to do their job. Mining involves expensive computer and high amount of electricity.
The direct result of many consecutive drops in reward will be Bitcoin mining being less practical, however buying and selling the existing Bitcoin will now be affected. Transaction fees are expected to become a more important source of income for miners as the block reward will become lower.
The Bitcoin price per unit hovered at a multi-year resistance area between $7,700 and $8,300. The 200-day simple moving average, which indicates a major long-term reversal point for an asset is currently around $8300
Whatever will happen after the halving, Bitcoin will remain the number one cryptocurrency and the only asset in history who started basically with no value, to grow 10,204%, up to a historical high of £15,599.
In the last week, the bitcoin price increased by 21% from £5,820 to £7,944, including spiking up at £7609.98 on Wednesday. This is generated by the high number of transactions and maybe the immense interest for the 2020 block reward halving
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