Bitcoin halving, is it what you are hearing a lot about lately, Crypto news portals are covering it, General news portals too. So you might wanna know what it is, Well Bitcoin Reward Halving is actually reward halving of mining process by which new bitcoins are mined/minted.Mining rewards means the transaction in which miners are rewarded a stipulated amount of Bitcoins for generating a new block through the process of mining. Presently, the reward of Bitcoin mining is 12.5BTC. This reward will be cut in half to 6.5 BTC in some days.
Bitcoin comes into existence through mining. To know in detail about mining and guides on how to mine read our articles Mining-An Introduction and Smart Mining. The only way new Bitcoins can enter into the circulation is mining, done by miners. These miners use really expensive machines/Pool of machines to mine the blocks of the Bitcoins. The new Bitcoins are issued to the new miners as a reward for mining the block automatically.
After every 210,000 blocks or after four years of period, the mining reward is cut in half. The initial reward of mining was 50 BTC per block.
After successive Bitcoin Halving events, the reward has been cut to 12.5 BTC. In the May 2020 Halving event, it will be cut in half to 6.25 BTC per block.
Bitcoin halving occurs so that the total supply of the Bitcoin is maintained under 21 Million mark while keeping the lucrative process of mining in business for long. Halving of Bitcoins is one of the most anticipated events of the Bitcoins industry. Bitcoin halving are anticipated and awaited by the large audience and considered as a milestone event.
Who Scheduled the Bitcoin Halving?
The Bitcoin halving schedule and method of circulation was chosen by the Satoshi Nakamoto. She/he or they, as we know nothing about the Bitcoin halving founder anymore, introduced this method of the Bitcoin halving. Now it is protocol defined .
There are some early emails written by the Nakamoto who had explained some of the mechanisms of the BTC such as monetary policy, deflation circumstances, or inflation. At that time, Nakamoto had no idea how big BTC would become that it is today.
Bitcoin halving is expected to occur in this month. This will have great implications on the Bitcoin price. Let us see how Bitcoin halving affects the price of the Bitcoin:
Drop in the Price of Bitcoin:
Before the halving events of 2012 and 2016, the drop in the BTC price was experienced. Similar effects are also been witnessed this year with halving event approaching.
Why Does Miners Hoard the Bitcoins?
Miners tend to hoard the bitcoins because the break-even price of the Bitcoin increases drastically after the halving event. If the miners hoard a lot of Bitcoins, they hope that they will receive larger benefits after the halving event.
According to the experts, the break-even price of the Bitcoins will surge from $7,000 to anywhere between $12,000 and $15,000.
Due to these trends, major mining firms tend to hoard BTC so that they can finance their operations right after the halving. Then, the surge is experienced and miners receive a lot of benefits from the accumulation of the BTC before the halving event. If the difficulty of mining raises, the BTC can also surge from these estimated figures.
How the Price of Bitcoin Does is Affected, At All?
Halving of Bitcoin is given so much attention because it is expected that the price of the BTC will increase drastically once the Bitcoin halving has occurred. However, we literally have no idea what may happen after the BTC halving.
There have previously been two halving events one in 2012 and one in 2016. May 2020 event would be the third halving event. So, we must look at the precedents set by the two halving events to see the impact of halving events on the price of the BTC.
The Halving Event of 2012 and Its Impact:
Nobody was aware of the sudden surge in the price of the BTC after the halving event in 2012. Nobody quite knew how market would respond to the unorthodox supply schedule introduced by Nakamoto. After decline in the rewards of mining, the price of the BTC spiked shortly after the BTC halving event of 2012.
The Halving Event of 2016 and Its Impact:
The impact of the second halving event was measured and anticipated just like the one approaching in May 2020. After the 2016 halving event, the price dropped by 10%. However, shortly after the halving event, it went back up to where it was. So, the BTC halving impacts the price of the BTC tremendously.
Impact of Halving Events on the Price of Bitcoin:
Each halving event had given way to the rigorous speculations about the spiked price of the BTC. Although immediate impact of the halving event was very little initially, it was later realized that the halving event increases the overall price of the BTC. During 2016, the price of the BTC increased and it was thought these were the effects of the aftershock of the first halving event. So, halving event impacts the price of the BTC positively with the passage of the time.
There are also people that tend to argue that if enough people know about the halving event and hoard the BTC before the halving event, the prices of the BTC would spike even before the halving event. So, halving events affect the price of the BTC due to the less supposed supply of the BTC within the market.
Mining Reward Halving is a big event for everyone, it is generally supposed to increase Price of Bitcoin by diminishing its new supply, Since bitcoin is new and has already swung wildly in last years, we can see Mining reward halving impact in much action maybe like after 10 years.