Early on Tuesday morning this week the long-awaited Bitcoin halving took place in the midst of a global pandemic. It is still unclear exactly how the halving will affect BTC’s value thus leaving stakeholders with a barrage of questions.
This is the third Bitcoin halving since it was launched, and many see it as crunch time for all cryptocurrencies. If the price solidifies or even increases over the next few months, then BTC could possibly begin to challenge the global dominance of the US$. On the other hand, if the price slides, then all the hype was for nothing which could see a mass sell-off as those that were looking to the halving for a quick return on their investment will likely lose belief. The key factor here is the long term effect on BTC’s value rather than looking for an immediate price hike due to the halving.
Bitcoin, also coined as digital gold as of late, was created in 2008 by a pseudonym name – Satoshi Nakamoto. It is a peer-to-peer decentralized virtual money system. In the beginning, 50 bitcoins per block were handed out to miners, and since then the crypto has made leaps and bounds coming up from the depths of $2 per coin to as high as $19,511.
Once 210,000 blocks are mined, which is currently every 4 years, rewards are halved in a process known as ‘Bitcoin Halving’. This halving is set to continue until eventually, in around 2140, there will be no more halving or BTC to mine. In total, the max number of Bitcoins that will be produced is set at 21 million!
Every time a halving takes place it reduces the total number of bitcoins mined per block. The previous reward, prior to yesterday’s 2020 having, was 12.5 bitcoins for each block mined while the new rate is 6.25 per block which stands until the next halving expected in 2024. Halvings are bad news for miners because their returns are lowered considerably. As for investors, it is still too early to say how the halving will affect BTCs current US$ or Euro pairings. In the long-term, it should increase demand and as a result, BTC’s price will increase., but in the short, realistically investors should not expect too much too soon.
Back when the first halving took place in 2012, each Bitcoin was worth US$2.01. The reward then was reduced from 50 bitcoins to 25 bitcoins per block mined. 4 years later and the next halving reduced the reward to 12.5 per block.
- 2012 – 25 bitcoins per block
- 2016 – 12.5 bitcoins per block
- 2020 – 6.25 bitcoins per block
- 2024 – 3.125 bitcoins per block
Currently, a single Bitcoin is still worth a few thousand US$ and each one has remained a valuable digital asset ever since its surge above the $1,000 mark in 2017.. So far this year BTC has fluctuated considerably and remains somewhat unpredictable as it still shows volatility. As the latest BTC halving approached, BTC’s valuation began to rise which was partially pushed by an increase in demand by investors.
*Some great resource for a detailed look at BTC’s historical prices are:
Over the first 5 months of 2020, BTC has fluctuated from a starting point of just over $7,000 to below $5,000, and it has even surpassed the $10,000 mark this year. Today it is worth just below $9,000. One positive we can take from this year’s ever-fluctuating BTC value is that the current price has at least stabilised between $5,000 and $10,000 and is not expected to drop below the $5,000 mark.
Speculation After 2020 BTC Halving
For now, the effect of the Bitcoin halving is not expected to kick in immediately so all those that thought the halving would equate to an instant ROI will need to hold on to their hats for a while longer.
It is important to understand that the ‘reward halving’ itself is not a factor in price movement. BTC’s value is affected when less are in circulation and high demand pushes the price of BTC up as investor reaction changes. In theory, with a lesser reward per block, the injection of BTC will slow as some miners exit the market, which could potentially increase the price only if demand remains high or if it increases.
However, most of the speculation that there would be an instant price hike came from those new to the industry who had heard about the halving and that previous halving activity had seen a rise in price – while more speculation came from industry experts were explaining what ‘could’ happen – some people only read the positive changes suggested and ignored the alternative views that explained the halving may not have any effect on the price in the short or long term!
Of course, the positive outlook is the one most clinched onto and this has caused the recent demand for BTC. Now the halving is in place, there could, in fact, be a slight drop before any rise. This is because mass sell-offs of crypto tend to instigate price drops. For those newcomers, are likely to sell their BTC now the halving has been implemented because the expected (promised) increase may not come. This group consists of those that probably do not want to take the risk of keeping their money in Bitcoin simply ‘to see what happens’. They will be put off any long term investment risk due to BTC’s volatile nature; a key factor that markedly affects BTC’s sell ratio.
Others that invested prior to the halving will be made up of those that saw a chance to get their money into BTC in early April. This is when the price dropped to between $5,000 and $6,000. They also had the added incentive of all the speculation that the up and coming halving could see the price of BTC overshoot.
Either way, the good news for this group is their investment looks to be safe despite BTC’s volatile habits.