Bitcoin Halving event is close and only about 39 days at the date of writing this article. Therefore, we will review the most important matters related to halving as follows:
- Mining definition
- Halving definition
- The importance of Halving
- Halving events
- The effect of the Halving on miners and mining companies
- The effect of the Halving on price
Mining definition
Mining is the process by which the network is secured and transactions are processed. In order to encourage people to extract bitcoins, each “block” contains a reward which will be received upon mining the block. The mining is done by the force of the computer that solves complex equations and logarithms.
Every day, countless thousands of kilowatts of electricity are consumed towards bitcoin mining.
People mining Bitcoin because they hope to earn Bitcoin which has value and can be bought and sold in different markets.
If you need more details about the mining of Bitcoin please check our post :
What is Bitcoin Mining? : Is it Profitable?
Halving Definition
Halving” refers to the events of reducing mining blocks rewards provided to the miners.
The importance of Halving
Monetary inflation, “excessive currency issuance”, is one of the most important causes of financial crises and economic failure. Therefore, the halving operations are the essence of economic models for digital currencies because they guarantee the issuance of new currencies at a fixed rate that follows the expected decline rate.
This rate used to combat inflation is one of the major differences between digital currencies and traditional banknotes from which infinite numbers can be printed.
Halving events
First, we should know that 85% of bitcoin was previously mined. Around 18 million are online and only about 3 million left to be mined.
The total number of Halving operations for Bitcoin is 33 operations, 2 are completed and 31 remaining. The first one was in 2012, then 2016 and the next one will be the third ( Date ETA: May 14, 2020 ). The reward will split from the current 12.5 and become half. That is 6.25 Bitcoin per block.
The last halving event in the bitcoin blockchain will be in 2041.
Let’s take a quick look at past Halving events:
2012 Halving
It was the first halving occurred to the Bitcoin chain in the history. Till the halving the reward per block was 50 BTC. It has then reduced to 25BTC per block mined after the halving.
- Rewards per block were: 50 BTC per block
- Rewards after the halving: 25 BTC per block
- Price on Halving Day: $12
2016 Halving
In 2016, the second bitcoin halving happened and it is the last one in history at the time of writing this article. After the 2012 halving, the reward per block was 25 BTC. It then reduced to 12.5 BTC per block after the 2016 halving
- Rewards per block were: 25 BTC per block
- Rewards after the halving: 12.5 BTC per block
- Price on Halving Day: $650
2020 Halving : The upcoming Halving
The 2020 will be the third halving in the bitcoin block chain. This will reduce the reward to half from the current reward of 12.5 BTC per block.
- Rewards per block are: 12.5 BTC per block
- Rewards after the halving : 6.25 BTC per block
- Price on Halving Day: …?
The effect of the Halving on miners and mining companies
As the time of writing, there are many mining companies in the world who shutdown their mining farms because of the loss in mining. The drop in value of bitcoin increased the pressure on bitcoin miners as the mining ASICs are costly and they are not getting the expected return after the mining. Those who are having the less electricity charge or free electricity connection are still finding good profit on bitcoin mining.
The bitcoin halving will double the pressure on miners as the block reward will be halved from the existing reward of 12.5 Bitcoin per block. This will again reduce the profitability of bitcoin mining. As a result, many miners are started switching to other coins or stopped mining.
Which prompted mining equipment manufacturers to offer discounts on many mining equipments.
For example DJ Miner, the global distributor of “MicroBT” in Shenzhen, China, announced the price of the “WhatsMiner M30S” mining device early last month. The price was $ 2,500 per device. But after the collapse of Bitcoin on March 12, it was Now the price has been reduced by 20 per cent to $2,000 per unit.
Bitmain also announced a discount for the “AntMiner S17”, bringing it to an estimated price of $ 1567.
The effect of the Bitcoin Halving on price
We have all followed in the past month of March the fluctuations that occurred in the digital currency market and all world markets. This led to a decrease in the value of bitcoin from the price of 9000$ until it reached 3,800$ ( lost more than 50% ). Bitcoin is trading at the time of writing the article at the price of 6717$
source : coin360
The Bitcoin price drop can be attributed to two main reasons
Corona pandemic:
It is no secret to anyone that the Corona pandemic now has had a great impact on financial markets. It significantly affected the price of digital currencies and bitcoin. This is one of the most important reasons that led to a decrease in the value of bitcoin in the past month.
The Halving date is approaching:
We find that when the time for halving approaches, many miners sell almost all of their mining yields by the fear of reduction in profit.
How Bitcoin price will become after the 2020 Halving ?
This is what the investors look at and the miners care about. How much will be the value of bitcoin after the halving? Will it go up? Will it decrease?
In order to determine or anticipate the price, we need to look at past divisions and the current Bitcoin price situation.
As we looked at the 2012 halving, the price of bitcoin on the day of the halving was ~$12, and after about four months passed, the price of bitcoin became ~$127, meaning that bitcoin increased its value by about 350%.
While we analyze the second halving, we will find that the price on the day of the halving was about $650, and after about four months passed the price of bitcoin became $760 meaning that bitcoin increased its value by about 20%.
In the third halving, investors and miners are waiting for what will happen to the price, with the hope that the bitcoin price will increase as before due to the limited supply, but will the Corona pandemic affect prices again?
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