Bitcoin will be halved sometime this month. What is Bitcoin halving, how will it affect the market, and what does this mean for the long-term prospects of miners and cryptocurrencies? Here’s everything you need to know about this key event.
Bitcoin Halving – A Brief Overview
The word “halving” might resemble a horror flick – something about a serial killer. But it’s actually a nickname for one of the most anticipated events in the history of Bitcoin.
At some point in this month (May), every 10 minutes the number of bitcoins (BTC) entering the circulation (AKA block rewards) will drop by half, from 12.5 to 6.25. This is a milestone that happens every four years and has happened twice before.
The potential creation of wealth is what is drawing so much attention to the upcoming event, which is usually held in half. The supply in the system will suddenly decrease, but theoretically, the demand will remain the same, possibly raising the price of the cryptocurrency.
As such, the event has sparked an enthusiastic debate about Bitcoin price forecasts and how the market will react.
Will this even increase the price of Bitcoin?
This has been the subject of a heated debate.
If we go by the previous cases of BTC reductions, token prices have risen. For example, in 2012, Bitcoin rose about 8,000% in 12 months after spending on rewards and rose again by almost 1,000% after cutting in 2016.
On the other hand, sceptics against it. The second BTC halving occurred at a time when Bitcoin was already gaining mainstream recognition and was matched with early currency offerings, many of which had to be bought with Bitcoin.
Paul Donovan, the chief economist of UBS Global Wealth Management, has said anyone who is familiar with the structure of Bitcoin will be aware of its halving, but potential “innocent” investors who aren’t maybe persuaded to buy tokens because the half is happening.
But then, Canaccord Genuity analysts, also claim that BTC halving may have a meaningful psychological component and could continue to have an impact on the price of bitcoin.
Will the miners be affected?
Bitcoin requires a lot of energy to mine, both to perform the calculations involved and to cool the computers that perform them.
BTC mining can cost you anywhere between $3,500 to $6,500 depending on equipment cost, electricity, and the place of storage of the hardware.
Competition is also increasing among BTC miners, leaving several smaller participants out of business. 5 mining entities based in China now control half of the power of all computers on the Bitcoin network.
Is anything going to change if you are a BTC owner?
Any subsequent change in BTC price will either leave you richer or poorer, except that it will be impossible to know exactly how much has changed due to half of the direct change.
To sum up, we can say,
Halving will play a key role in preventing inflation by periodically slowing the pace of Bitcoin creation, so as not to outrun demand. Now, wait and see what the future holds for us.