Bitcoin was first invented in 2008 by a person named Satoshi Nakamoto, and since then it’s believed that the number of coins exciting in the crypto space is predetermined but big enough so it can be available for more miners and investors. Some people strongly believe that cryptocurrencies are the money of the future, but the number of those who are still skeptical and suspicious is also big. But, none of this decreased its popularity. Its value is changing every day, and people also criticize it for big electricity consumption.
Every four years, there is an event related to the number of Bitcoins available in the so-called mining-fields, named Bitcoin halving. The crypto society scheduled the event for 11 May 2020 and the number of the coins available in cyberspace was cut in half. But, why is this happening, and why it’s so important to the miners and investors?
What’s behind the Bitcoin halving?
Bitcoins and the blockchain network is a collection of computers all around the world that are used for crypto mining. Every computer keeps the logs saved on its memory, so no one can manipulate the transaction and the network stays transparent.
Every four years, after around 210,000 blocks are mined, the rate of the currency is cut in half, so the crypto space can be filled with new Bitcoins. If we use an analogy, that is similar to inflation. Miners can still mine and they will be rewarded with some kind of fees. They also do that to lower the competition between the investors. According to austriantimes.at, there can be “only” 21,000,000 Bitcoins circulating in the crypto space at once, and the miners should be active. If they don’t do that, the mining will become more and more difficult.
With a few words, we can say that halving as a term, means cutting in half the block rewards. Bitcoins are the most commercial crypto coins and as time goes by, it’s expected that the prices will rise or drop, depending on the market’s conditions. In the last few months, Bitcoin’s price dropped due to the coronavirus crisis, but the pandemic affected the whole financial sector, including the cryptocurrencies. On 11 May, the halving happened, but the price continued to rise. On 7 May, one Bitcoin was worth $10,000 and on 11 May it was about $8,600. There was a quick peek in the next few days, so the market can stabilize the value when the price was above $9,000. But, on 25 May, by the time this article is written, the price is $8,922, which is $200 more compared to the previous day. In the next period, the price will become more stable and predictable (as much as it can be).
If we can calculate the possible value until the next halving, we need to make optimistic math that predicts that in 2023 the price will get above $60,000 and the cutting process will decrease the rate to $14,193 in 2024. But, this market is pretty unpredictable and we can only wait to see if these days will come.
How did the previous halving affect the rate?
The first halving happened in November 2012 and it resulted in a great rise, from $11 to $1,000 in the first year. The second one took place in July 2016, which resulted in a $13,000 raise, from $700 to $20,000 in one year. Today’s rates are higher and the fluctuations are not that big, as we can see from the recent halving event, but the most exact result will be shown in the next year. There is no estimated time when all the Bitcoins will be mined or spent, and will they end after that. No one can predict the future of the cryptocurrencies, but as they become more and more popular, it’s not impossible to become a regular payment method all around the world. We also can’t predict if the halving would cause dramatic changes to Bitcoin’s value in the next few years, until the next event. Many factors can affect the rate, just like the global coronavirus crisis caused some not so dramatic drops. This currency had the luck to be the first in this big market and every other is just compared to it. But, that doesn’t make them less worthy and many people decide to invest in other cryptocurrencies because their smaller popularity doesn’t make them vulnerable to the world’s changes.
Why is this event important?
Halvings are important because they’re a good way to reduce the new Bitcoins to be generated by the network. If they don’t do that, the currency will lose strength and stability.
If you decide to trade during these “critical” days, you need to keep update your knowledge every day, because you can’t predict the rise or fall of the currency. You only need to find the right platform to do the trading and then keep your currencies in your digital wallet, and wait for the best rates to come.
There is no particular pattern of rises and drops during the time, so you need to trust your guts more often when it comes to crypto transactions.
Bitcoins in 2020
As we already know, the coronavirus pandemic caused big changes and fluctuations in the crypto market. On 11 March more than 280,000 Bitcoins were sold by their owners. Exchanging platforms had a lot of traffic those days because many investors were trying to sell their crypto owning, so they won’t lose too much. But, the difference between crypto and fiat money is that the first type can stabilize faster and don’t depend a lot on the global economy.
The real situation is not that bad as people expected. Many investors decided not to mine in the first months of the pandemic and wait for better times. But, the situation got a little better in April this year, leading to not-so-scary halving earlier in May. Investors are now waiting to see how this event affected the rates in the long-term, so they can decide what to do with their savings or should they proceed to mine.