29. April 2020

Bitcoin Block Halving 2020: What is the Bitcoin Block Halving and what we could expect after this event?


BITCOIN BLOCK HALVING 2020



There have been different expectations for the price of Bitcoin following the next block halving that will occur in May 2020. Both halving events that took place in the past, Bitcoin surged to a new all-time in a year after the halving. December 2017 was the last time that this happened, when the Bitcoin price reached about $20,000, after the Bitcoin Block Halving in 2016. In the beginning of 2017 the Bitcoin price was just around 1000 $.



It was also pointed out that the Bitcoin became more matured compared to the previous years before halving. Halving doesn’t just one day effect; the effect on the real market takes time.


Let´s take a look to the Bitcoin value chart of 2013, one year after the Bitcoin Block Halving in 2012:



Source: https://coinmarketcap.com/currencies/bitcoin/

One year after the Bitcoin Block Halving Event in 2012, the Bitcoin price rose to over $ 1000 for the first time in November 2013, while before Bitcoin was sometimes even trading for less than $ 100 in the same year.

What is the Block Halving Event about?

Whenever Bitcoin miners produce a certain amount of Bitcoin, they get a reward. This reward is part of the Bitcoin’s issuance. When Bitcoin started, miners got 50 Bitcoins per block. After mining 210,000 blocks (after four years), the reward halves, and it will continue halving until the reward per block is 0. (This will happen approximately by the year 2140). As at the time of writing this article, 12.5 is the block rewards, and after the next bitcoin block halving event 2020, it will decrease to 6.25.

The countdown to the next Bitcoin Block Halving can be watched live here: https://www.bitcoinblockhalf.com/

What is the essence of the Bitcoin Block Halving?

Bitcoin was made to serve as a deflation currency. Bitcoin is like gold, and the premise of designing Bitcoin was that the issuance would continue to decrease over time, which makes it scarcer. The scarcer the Bitcoin, the more the demand, and the more it can be used against inflation.

Looking at it from the other angle, fiat currencies (e.g., the US dollar) inflates with an increase in monetary supply, which causes a decrease in the purchasing power. This principle is called monetary debasement by inflation. The simple way to explain this better is by comparing the prices of houses decades back with the prices now.

Predictable monetary supply

Since Bitcoin issuance has been known over time, people can always rely on controlled and programmed supply. This helps people understand the current rate of Bitcoin inflation, what the future rate might look like, the amount of Bitcoin in circulation, and the amount of unmined Bitcoin.

Who is in charge of Bitcoin issuance?

Bitcoin issuance is controlled by the network itself, and it is derived consensus through all Bitcoin participants. The following are the consensus rule that has been in existence ever since Bitcoin came into existence:

       Only 21,000 Bitcoin will be produced
       Block interval of 10 minutes
       Four years interval for every halving.
       The reward for block starts at 50
       Halving continues every four years till it reaches 0 (expected to reach 0 by the year 2140)

Note: Before any change to these parameters can occur, all Bitcoin participants must reach a consensus.

Halving dates that have taken place in the past

The first-ever Bitcoin halving event occurred 29th November 2012 at the block height of 210,000, and the second event occurred 2016 at the block height of 420,000.

The price-performance in the last halving

There have always been debates and controversies on what Bitcoin will do in terms of pricing for a halving event. Some people believe that halving is priced in the market already, and nothing can be done to influence it. The other people believe that price equilibrium will make the halving lead to a price increase if the demand for Bitcoin is equal or greater than what it was before the halving event.
There have only been two halving events so far. 

This means there will be limited historical data on Bitcoin halving, and things have changed from 2016 to 2020. The instability due to the coronavirus pandemic has also affected the stock market, and Bitcoin has also suffered a substantial price drop, which could be huge change to buy Bitcoin cheap before the next Bitcoin Block Halving.


Conclusion

Bitcoin has some of the same properties as gold, since the coins e.g. are strictly limited and the production requires an active mining process that costs the miners money. In contrast to fiat currencies, the inflation rate due to the Bitcoin Block Halving Events is becoming less and a maximum of only 21,000,000 Bitcoins can be produced.

The demand for cryptocurrencies like Bitcoin is steadily increasing and cryptocurrencies are particularly popular in times of crisis. The digital gold Bitcoin is far from reaching its peak and a lot is happening in the field of blockchain technology. This technology has been regarded by experts and companies as the future for years.

The Bitcoin Block Halving Events halve the rewards for the miners every four years and this has always led to enormous price increases. So it is expected that these effects on the Bitcoin price will repeat after the Bitcoin Block Halving 2020.

My suggestions for buying and trading Bitcoins & other cryptocurrencies:


The cryptocurrency exchange Binance is one of the largest and largest trading exchanges for cryptocurrencies worldwide. Although the cryptocurrency exchange, founded in Malta in 2018, is still a very young company compared to others, Binance was already the largest trading exchange worldwide in 2018 in terms of trading volume.


Bittrex is a large trading exchange that has been in existence since 2013 and is based in Washington. Here you can exchange many cryptocurrencies for one another and it is one of the best and most reliable platforms for trading cryptocurrencies.


At Wirex you can order a Visa credit card free of charge, to which you can exchange bitcoins in euros / dollars and other currencies using the Wirex smartphone app, as well as buy bitcoins and other cryptocurrencies.

With the credit card you can pay in every shop, even receive cashback in bitcoins with every purchase and you can withdraw money at any ATM worldwide.


Bitcoin Exchange CEX.IO

At Cex.io, after registering and verifying, you can easily buy Bitcoins and other cryptocurrencies by credit card or instant bank transfer and trade against many different currencies. Payment in euros / dollars to a bank account or credit card is also easy, quick and reliable.


Disclaimer:

This article is not an investment advise and just a objective review of facts from the autor. Everyone is responsible for themself and investing in cryptocurrency could cause a total lost of money in the worst case. The autor also own Bitcoins and other cryptocurrencies.

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