2020 is going to be an important year for Bitcoin. And this is not some speculation. We are talking about the after-effects of its halving. Taking place on 24th May 2020, this will be the third time Bitcoin reward generation will be halved.
Bitcoin price is being watched very closely by experts. Every day we see hordes of prediction graphs, newer resistant and support levels being discovered. Yet, the impact of Bitcoin halving on its price remains a lesser addressed fact. At least this is what happened in 2012 and 2016.
But this time be ready to adjust your portfolios accordingly as we explain “why” and “what” is going to change.
What does Bitcoin halving mean?
To understand the term beyond the mere definition, lets us first look at the Bitcoin generation mechanism.
Bitcoin’s supply is limited (unlike fiat’s). Because of its deflationary nature, only 21 million bitcoins can be mined. During the last decade, the miners managed to “dig out” 18 million.
But why do miners participate in block generation? Because of the associated rewards for solving the transactions. Consequently, these coins have become part of the overall BTC circulation. That’s how the number of BTC in circulation reached 18 million.
All in all, Bitcoin halving is the process of dividing the block reward which is algorithmically programmed into Bitcoin. It takes place following a generation of 210,000 blocks. This happens every four years.
When Bitcoin was first mined, each miner received 50 BTC every 10 mines. That happened back in 2008.
Then, in 2012 the first Bitcoin halving occurred, reducing the reward generation to 25 BTC. More miners had to compete for it.
Another halving took place in 2016, bringing the block reward down to 12.5.
And it is all set to happen again in May 2020.
Will this halving send Bitcoin price to the moon?
There a lot of disagreement around what to expect. And many theories suggest the price intensification is not going to happen in a stroke. After all, during the last two halving events no boom took place.
First Halving: November 2012
Just before the first halving in November 2012 Bitcoin’s price was close to $11. And the block reward had been 50 BTC per block. Post halving the block reward was reduced to 25. And the price exhibited a slight jump, reaching $14.
However, next year, the price hit the $1,100 mark, then it settled at $220. Post which the price growth was gradual.
Back then, very few people knew about Bitcoin.
Second Halving: July 2016
Over the next couple of years, Bitcoin’s popularity soared. The price settled in the range of $580 to $700. However, as it edged closer to the second halving, a special event happened. The one you’re most likely familiar with. While the block reward halved to 12.5 in July 2016, within a year and a half the price went up to $20,000.
And then purged down to $4000-$5000, where it stayed till July 2019.
During all these years, the mining difficulty kept increasing. As it became less profitable some miners gave up, others decided to hang on.
Bitcoin Price trend post third halving
Undoubtedly, Bitcoin’s popularity, media exposure and demand vs supply have gone uphill. But the industry is still unsure about how strong the upsurge will be. This time the rewards will be halved to 6.25 BTC per block.
During each halving, it was difficult to determine what exactly played a pivotal role in price surge. Back in 2012, hardly anyone knew what halving would bring. People simply started buying and the price surged. Then, altcoins started to gain popularity which pumped the market.
As per industry experts, the ecosystem has changed drastically since the last two halvings. The public awareness is on the peak. Both retail and institutional investors’ interest is rising. So what to expect this time?
Matthew Roszak from Bloq believes the price will surge closer to $15,000 – $100,000. He says the market maturity will play a vital role this time. Projects like Bakkt and Libra are attracting a lot of attention, after all.
On the contrary, Jian Wu co-founder Bitmain, the price might not change. That’s because the traders understand the dynamics better now. And they expect it to be another bubble bull. He supported his statement with what happened during the Litecoin halving. First, the price went from $31 to $135, then it stooped down to $57. And this could happen to Bitcoin too.
Regardless, one thing is for sure: the miners are up for another round of sustenance struggle. As the mining difficulty increases, the profitability is expected to be hit hard.
And the pressure will be felt by the traders with transaction delays and network fee inflation.
Previously, we covered how experts are calling Bitcoin an attractive risk.