It’s here. It’s finally here. The Met Gala of the cryptocurrency world, the Bitcoin halving (Or halvening, if you like syllables) is finally here.
Bitcoin, the world’s largest cryptocurrency, recorded a major milestone today after its block rewards were cut in half from 12.5 BTC to 6.5 BTC at block #630,000, mined by AntPool.
The block reward halving is the third halving in the history of Bitcoin. The third halving in a series of 64 halvings until 2140 when estimates suggest all Bitcoin will be mined by.
While this is a crucial development for the entire cryptocurrency market, it is pertinent to highlight the possible implications and effects of the halving.
For starters, mining rewards will fall, a development that will have an effect on the profitability and sustainability of miners in the market, especially those who don’t run industry-scale operations. While many argue that this will push out the “weak miners” in the market, the fact of the matter is profitability and sustainability are predicated on the price of the world’s largest cryptocurrency, as well as upkeep costs.
This was a major concern for much of 2020 as not only did Bitcoin surge over $10,000 briefly, but it did also fall as low as $4000, with the price volatility of the market consistently raising questions for miners. These were made worse by reports which suggested that the average cost of mining a single Bitcoin would almost double, post the halving.
Over the past few weeks, however, these concerns have been allayed somewhat, with Bitcoin registering strong recovery since the price drop in March. In fact, this hike in Bitcoin’s price was also supported by improving Bitcoin Futures and Spot volumes, factors that have now pushed miners into a better position than the one they were in a month ago.
The fact that miners seem to be hoarding Bitcoin also suggests that they expect Bitcoin to rise higher in the next few weeks.
Will that happen though? The larger crypto-community remains positive, with many expecting the price of Bitcoin to surge to a triple-digit value by 2021-22. And perhaps, there is good reason to expect this as well. After all, Bitcoin surged exponentially following its last two halvings, with the bull cycle after its second halving culminating in Bitcoin touching its ATH in December 2017.
However, how long until Bitcoin reaches those heights again? That is a question no one has an answer to; unless you’re PlanB.
Finally, and this is important, the halving has resulted in Bitcoin’s inflation rate dropping lower than gold’s.