In less than a year from now (May 2019), a very important event takes place on the Bitcoin blockchain network. This event is called ‘Bitcoin halving’ and could be a very important factor in launching a new furius rally of this digital coin. To makes things not that complicated, one could say that ‘The halving’ means a reduction in mining rewards.
Currently, every 10 minutes a new block is mined on the Bitcoin blockchain network and as a reward for miners, 12.5 Bitcoins are newly created. Next year, when the halving takes place, only 6,25 Bitcoins will be available as a reward for miners. This ‘halving event’ will be the third time in the history of Bitcoin to happen where the first one took place in November 2012 and the second one took place in July 2016. So this halving has a large impact on the Bitcoin supply created on a daily basis, what impact should it have on its price and could it create a new Bitcoin rally?
How does Bitcoin halving exactly work
Bitcoin is the coin that is being used within the Bitcoin blockchain network and one of the properties of this coin is that its created by the miners on the network. The miners are rewarded in Bitcoin for giving electricity back to the network. In the Bitcoin protocol has been programmed that the rewards for miners will be reduced after every 210000 blocks. That is about every 4 years. This rule has been programmed by Satoshi Nakamoto, the original founder of Bitcoin. This halving event makes the Bitcoin protocol unique in its kind and also famous for being an online cryptocurrency.
Deflationary policy of Bitcoin and price rally
The most important reason for being famous as a cryptocurrency lies in its deflationary property. This ‘halving event’ makes it impossible for central owners to print any new form of digital currency. In other words: Bitcoin is the first digital currency for which it is impossible to print some extra coins. The outcome of the mining effort is totally clear upfront: There will only be a total of 21 million coins mined.
Bitcoin halving 2020: when will it take place
The Bitcoin halving will take place at the end of May 2020. You have to realize that this halving event can’t be pinned to a certain date. This event occurs within the blockchain network exactly after block 210000 has been mined. The reason that the outcome date isn’t clear yet is that we have to take into account mining difficulty for block creation. The difficulty which is a parameter within the blockchain network varies which makes the outcome date hard to predict. But if we take into account that the difficulty won’t vary a lot, the Bitcoin halving event will be planned at the end of May 2020.
What’s the effect of ‘Bitcoin halving 2020’
It’s the third time in the history of Bitcoin that the halving takes place. The first Bitcoin halving was in November 2012 and the second was about 4 years later, in July 2016. One thing that both these halving events have in common is a significant rise in usage of the Bitcoin cryptocurrency. This increase in usage will also be expected when the third halving occurs.
What happens with Bitcoin inflation
At the end of May 2020, the rewards for miners will be reduced from 12.5 to 6.25 Bitcoins per mined block. The annual inflation rated will then be 1.8%. If you compare this with gold which has an annual inflation rate of 3%; it means that Bitcoin will be less scarce compared to gold. This scarcity property of Bitcoin is one of the main reasons why experts say Bitcoin is the digital gold of the 21 century.
After Bitcoin halving: How many Bitcoins created daily?
This new amount of mined Bitcoins on a daily basis is quite easy to calculate. Today, after every 10 minutes a new block is created. In this newly created block, 12.5 new Bitcoins are mined. Every hour 75 Bitcoins are created. This means 1800 Bitcoins on a daily basis(24 x 75 BTC) created by miners today. So after this Bitcoin halving event, only 900 Bitcoins will be created in every new block.
What’s the total supply of Bitcoin in May 2020
When the Bitcoin halving event occurs, there will be a total supply of 18.375.00 Bitcoins. This amount of Bitcoins is 85% of the total supply of Bitcoins to be mined ever. No more than 21 Million Bitcoins will be created totally. Currently, there is an estimation of 25% of the mined Bitcoins which have been lost. In other words, when the halving event occurs not the amount of 18 million Bitcoins will be available to the public but just a ‘lousy’ amount of 13.7 million coins. Just imagine: That is not even 0.002 Bitcoin available for every person living on earth right now.
Will Bitcoin halving 2020 create a new rally in price
If you take into account the previous halving events then you could say this is a reason the price will go up. In other words: it’s a good opportunity to invest in bitcoin near the halving event or just after.
In 2012, for example, after the first halving event in Bitcoin, the price went from $14 to $140. The second halving event in 2016, caused the price of Bitcoin to go from about $630 till $5100 nowadays.
In my opinion, the rise in the price of Bitcoin during the halving event has two main reasons :
- Speculation – A lot of people are willing to take a risk once a hype is created. This also called a self-fulfilling prophecy. This Bitcoin halving event will not be passed by without being noticed by the greater public. This will attract new investors to the bitcoin market, create demand and eventually a rise in price occurs.
- Supply and demand – Like I mentioned earlier, this hype will create larger demand compared to the supply. Another good reason is the reward paid in Bitcoin to the miners. These rewards will be halved in just 24 hours from 1800 BTC to just 900 BTC on a daily basis. Bitcoin will be known to a greater audience and creates more trust which automatically raises demand. To summarize: a very bullish scenario for Bitcoin to rally futhermore!
What to do before this halving takes place?
If you currently own Bitcoin and just ‘HODL’ it then there is not much you can do than just waiting patiently. There is just no reason to move Bitcoins from cryptocurrency exchanges to a local wallet. If you want to buy more Bitcoin but don’t trust an exchange than you can buy more here.
For Bitcoin traders or investors who want to profit from this opportunity, you can go to a cryptocurrency exchange and buy some new Bitcoin. For European natives it’s currently very easy to buy Bitcoin or Ethereum with fiat here. Take into account that this article is just my opinion and not real financial advice so do your own research before investing wisely! So with this being said, enjoy this new journey as an aspiring Bitcoin investor, take time to relax and have fun watching this new upcoming Bitcoin rally come to reality.
Bonus video: Bitcoin 2020 Halvening – Will it be a Great Big Disappointment?
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