Are you ready for Bitcoin halving yet? Event should take place on May 12, 2020
Whether you’re a longtime or recent member of the crypto community, you’ve most likely heard of Bitcoin halving. The event is fundamental (and mandatory) for BTC, shaping what the currency tends to become after the event. In this text I will present 3 facts that explain the importance of Bitcoin halving.
1 – Bitcoin halving is a deflationary event
The first point of this list is linked to the basic fundamentals of BTC. Think that there is a total non-expandable supply of 21 million Bitcoin units. This may seem like a lot, but in reality it is very little.
To give you an idea, if each person residing in the state of São Paulo today wanted to buy only 1 BTC, this would not be possible, since the state has more than 44 million inhabitants. Another impediment is that, even though São Paulo had “only” 21 million inhabitants, not everyone could buy 1 BTC.
The reason for this is that not all Bitcoin has been mined so far. In fact, just over 17 million BTCs have been mined to date. But what does all this data mean? Well, in general, they first show that Bitcoin is finite, scarce, and that its offer is limited.
One of the main factors that makes Bitcoin so valued and desired is precisely its scarcity, after all, if there were an infinite number of Bitcoins in the world and anyone could have a unit, what value would the currency have?
This is how halving works in Bitcoin, limiting the amount of BTCs available on the market, preventing the currency from inflating due to having an exaggerated number of it in circulation. With halving, the more Bitcoin is mined, the harder it is to get new coins, as the mining reward for each block drops from time to time.
2 – Halving reduces miners’ reward
This point has already been more than debated, but have you ever wondered what would happen if miners decided not to mine new coins because it is no longer profitable?
While halving prevents currency from inflating, it offers an operational risk. With fewer Bitcoins being mined after halving, the asset’s price needs to rise to keep mining viable.
It is clear that the application of powerful new technologies increases the power of miners, but there is still a real danger of abandonment. It is essential that BTC remains profitable after halving for those who dedicate themselves to mining the asset, otherwise, there may be a snowball effect involving hashrate and price, where the drop in price causes the hashrate to fall, further lowering prices .
3 – Halving is a historically optimistic event for Bitcoin
In practice this does not say much for the coming halving, as there is no guarantee that the patterns of the past will repeat themselves. However, in general, halving is excellent for the price of Bitcoin.
Bitcoin’s first halving took place in late 2012, when Bitcoin was worth just over $ 10. Shortly thereafter, in 2013, BTC had already appreciated more than 100 times, exceeding US $ 1,000.
The second halving took place in mid-2016, at the time costing just under $ 1.00 (after falling heavily with the Mt.Gox hack). Everyone knows the latest post-halving: ATH at almost $ 20,000 and a sensational bull run.
Image by: FoxBit
If the pattern follows, the new halving could take the BTC to heights.