Bitcoin has just undergone “halving”- a landmark event that slashed the rate at which new coins are produced.
The much-anticipated adjustment occurs every four years on average, and this means that the return for unlocking a “block” has been reduced from 12.5 to 6.25 new coins.
To understand the significance of halving, we need to remember the role of miners in bitcoin existence. First of all, the cryptocurrency depends on these actors who operate software that serve to solve complex digital puzzles in return for Bitcoins.
The history of Bitcoin halving can be traced back to history. Satoshi Nakamoto, Bitcoin’s founder, incorporated halving into the crypto’s code as a measure to control inflation as far as the digital currency is concerned.
The latest halving, which took place on May 11, happens to be the third halving since its birth in the year 2009. Looking back, the first halving took place in November 2012, and the second event in July 2016.
Considering that the next halving is set to take place in May 2024, here’s what you need to know about the latest event in Bitcoin halving:
The Basics – Bitcoin Halving Is Part of the Controlled Money Supply and Deflationary Economics
Before we examine some of the typical effects of Bitcoin halving events, we ought to consider the basics of the cryptocurrency’s foundation. The first thing that we have to remember is that Bitcoin follows the laws that determine a controlled supply coins in the market.
A limit of 21 million Bitcoins has been prescribed as far as the cryptocurrency is concerned. This is an aspect that has remained solid since the coin’s creation. This measure is meant to challenge the idea of inflationary economics and, importantly, unconventional monetary policy.
Halving Affects Bitcoin Miner Activity
Miners are usually the first crypto actors to feel the immediate effects of Bitcoin halving. Among the economic consequences experienced by these hashrate controllers is a sudden drop in mining revenue whenever the price per Bitcoin fails to adjust immediately to the halving process.
Looking at this year’s halving event, a host of pundits may easily predict a Bitcoin price drop in the short term. This possibility is reflected by the fact that halving has doubled the cost of Bitcoin production and rendered the older generation Bitcoin mining machines (such as Bitmain-Antminer S9) unprofitable.
Thus, any burdened miners may easily be thrown out of business and forced to close shop and offload their Bitcoins to recover costs. This occurrence will instantly beget a bearish situation within the Bitcoin market space.
Bitcoin Halving Usually Influences Price Movement in a Huge Way
Although less noticed, the cryptocurrency’s halving day in 2012 affected produced considerable price movement. Four years later, the event’s occurrence affected market dynamics significantly by amplifying the halving effects of the year 2012.
The 2012 halving saw Bitcoin’s price rising from $11 to more than $1,000 in the year 2013. This event was followed by a Bitcoin crash, which was salvaged by the 2016 halving event. It is from the 2017 crypto era that the cryptocurrency ascended in price to hit $20,000, an aspect that earned the digital currency a lot of attention the world over.
This 2020, it is reported that bitcoin’s price volatility has declined following the latest halving event.
This Year’s Halving is a Very Unique Event
Although we cannot gloss over the interesting financial episodes that typified the 2012 and 2016 bouts of Bitcoin halving, 2020’s halving has happened in a rather interesting time, the COVID-19 era.
Despite the fact that the coronavirus crisis has caused an economic disaster across the world, with fiat currencies losing value by the minute and once-powerful organizations finding themselves on the brink of bankruptcy, Bitcoin is defined by a different story.
The post-COVID-19 pandemic period will most likely be marked by an increase in crypto adoption. In fact, some experts have predicted that Bitcoin will boom once the coronavirus crisis is over. Time will tell.