bitcoin halving 2020 featured image 50% less on mining rewards

What’s happening during the Bitcoin Halving 2020?

The bitcoin halving 2020 is around the corner and is likely to hit headlines again soon. This event is scheduled to happen about every 4 years, more specifically, every 210 000 blocks. The halving will cause the reward for mining bitcoin to be reduced by 50%. The current reward to solve a block is 12.5BTC, which means that about 75BTC is introduced to the ecosystem every hour. This translates into about 1800BTC per day, which is roughly $15 million on 19/11/2019.

Less bitcoin being introduced to the network is very interesting to traders because it is usually accompanied by price volatility. The thinking behind this is that if less bitcoin is added to the system, and the demand stays the same or increased, the FIAT value will increase post halvening 2020.

In the past

Previous halvings have had different effects. About a month before the first halving back in November 2012 the FIAT value of bitcoin rose by just under 10% and continued to rise in the following 12 months. The bitcoin price gained around 20% during June 2016 running up to the 2nd halving.

Past performance should not be seen as a sure-fire indicator of future returns, we can, however, gain some insight from past trades. It seems quite logical that the price rises happened a month or so before the actual halving. This is most likely because these “dates” can be estimated pretty accurately and therefore traders would be pricing these events into their trading plan.

2020 Bitcoin halving Timeline in Context

Date Event Block Number Reward Total BTC introduced
3 January 2009 Launch of Bitcoin 0 50 10500
28 November 2012 1st Halving 210000 25 525000
9 July 2016 2nd Halving 420000 12.5 2625000
around 18th May 2020 3rd Halving 630000 6.25 1312500
2024 4th Halving 740000 3.125 656250
2028 5th Halving 850000 1.5625 328128

How Will This Affect You

If you Hoddle bitcoin the halving (and yes, some call it the bitcoin halvening) doesn’t affect you, moreover your coin is likely to appreciate as a result of the bitcoin halving 2020. If you are a bitcoin miner, then consequently you will now be receiving less reward for your hashing power and likely to fall by the wayside unless the value or demand of/for bitcoin increases dramatically. Most mining operators, however, have already calculated these costs and will, therefore, be able to continue business as usual

The security of the bitcoin network is sometimes brought up as a topic for discussion during these times but in general, it should have no bearing as the difficulty adjustment takes care of this problem.

How Will the “Bitcoin Halving 2020” influence the Bitcoin Price?

This is the million-dollar question on everyone’s lips. Seeing as the bitcoin halving 2020 is only 5 or so months away, many traders are already taking positions and it appears many retail investors are looking at other ways of profiting from the halving, with futures and CFD providers seeing an uptake in volumes, relating to this event.

But Why is All This Happening?

Bitcoin is a technological breakthrough. Satoshi Nakamoto (bitcoins’ creator) solved the byzantine general’s problem and gave us the world’s first autonomous peer to peer cash system. A part of this design is the security mechanism which provides consensus on the network. By design, this system uses an economic incentive for miners to “do the right thing”, yet this also doubles up as a fair way of introducing new coins into the eco-system in a systematic, planned manner. Ideally, this is done over a set period with a set rate, which everyone knows in advance.

As of 22 November 2019, it would require around 18million dollars per day just to keep the bitcoin price-stable (assuming around 1800 newly minted coins per day enter the eco-system). Should the FIAT value remain flat, after the 2020 bitcoin halving, only 9 million dollars would be required to enter the ecosystem every day? This is actually not that much and we need to remember that nearly 95% of all FIAT money does not exist in the form of cash.

The halving is a brutal knock out event. Miners that are inefficient will simply be wiped out – Marco Streng

The Effect of The Halvening 2020

It is self-evident that the FIAT value of coins will increase over time as there is a limited supply. As a result of this, the distribution of bitcoin was faster in the beginning. As FIAT value increases, the bitcoin network reduces the reward to compensate for the increase in value and still keep the network secure.

Nakamoto cleverly designed the system to “self-regulate” via a process called difficulty adjustment. Furthermore, this also has a bonus effect where it allows for the hash rate to constantly increase (making the network more secure). However, this does not encourage collusion as miners and mining pools would simply switch their hashing power elsewhere if it is more profitable to do so.

Are you planning to “trade” the halving? Let us know your views in the comments section below

***This article is intended to educate and should in no way be seen as investment advice or an enticement to use any specific platform or service. Cryptocurrency markets are highly volatile with big profit opportunities but you should also remember that you could lose part or all of your investment whenever you take part in any high risk investment. Crypto trading is not a regulated industry in most jurisdictions, which in itself carries additional risks. IF YOU ARE NOT AN ASTUTE TRADER, SEEK INDEPENDENT FINANCIAL ADVICE BEFORE MAKING ANY INVESTMENTS.***

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