Bitcoin Halving 2020 – The Biggest Bitcoin Event Of The Year

Bitcoin halving 2020

Cryptocurrencies are becoming the talk of the day; they have taken over television, newspapers, radio, podcasts, blogs and even everyday conversations. There are over 500 cryptocurrency terms, some of which are self-explanatory and easy to understand and others which are not quite as self-explanatory. Bitcoin halving is one of the not-so-obvious ones.

Bitcoin halving

Bitcoin halving or in other words Bitcoin halvening, is presently the most anticipated event in the cryptocurrency sphere.

It is expected that sometime in May, the number of Bitcoin entering circulation will drop by half at intervals of 10 minutes. People are certain that this milestone will be crossed this year because it happens every four years and has happened twice before.

The main reason why the halving is drawing so much attention and sparking all kinds of debates is the allure of possible riches. What typically happens is; the amount of Bitcoin entering the system suddenly shrinks, but theoretically, the demand stays the same thus driving the Bitcoin price up. People have been predicting the Bitcoin prices in May and also discussing how the market is likely to respond.

If Bitcoin miners have fewer coins to sell, then there will be fewer coins available for purchase in the market. This periodic decline in Bitcoin’s mining has a deep significance for the functioning of the currency.

The reason behind the halving event

Bitcoin halves mainly because of how its software is designed. The creator does not explain the reason behind this halving, however, people speculate that the systems were designed in such a way as to distribute coins more quickly at the beginning so as too insensitive people to join the network and mine new blocks. According to this theory, the block rewards were programmed to halve at regular intervals because the value of each coin rewarded was deemed likely to increase as the network expanded.

The downside of the Bitcoin design and particularly the halving is how it encourages the users to save hoping for the coin’s increase in value rather than to spend it. This may have fueled the boom and bust cycles in the past, with users hoarding coins to cash out at key levels. Bitcoin has been compared to a pyramid scheme with people arguing that it was designed to rewards those who got in early.

A deeper look into Bitcoin halving

The process through which new Bitcoins are created is called mining, it entails solving of complex mathematics computations using very powerful computers. When a miner successfully solves a math problem, they release a new Bitcoin into circulation as block rewards. Every four years, the total number of Bitcoins that miners can potentially win is halved.

In the year 2009, the system started at a total of 50 coins being mined every 10 minutes, today almost two halvings’s later we have 12.5 Bitcoins being distributed every ten minutes. It is speculated that only the maximum number of Bitcoins is 21 million and that its mining will stop in 2140 because this number would have exhausted.

The mega mind behind the creation of Bitcoin is called Satoshi Nakamoto, nobody knows who this is. It could be an individual or a group, no one knows, especially since Satoshi diapered into thin air shortly after sharing the invention with the world. Since the creator remains unknown, we will never find out why they chose this particular mining formula as a way to create new Bitcoins.

According to emails that are believed to belong to Satoshi Nakamoto, the mining method was the best way to distribute these coins because they would be distributed at a constant rate. At the time of creations, Nakamoto did not have a way of knowing how many people would adopt the new online currency if any.

Traditionally, money is controlled by central authorities such as the government, the Federal Reserve and the central bank. They put measures in place to add or remove money from circulation. Most of the time, these central authorities are responsible for inflations. On the other hand, Bitcoin is highly decentralized.

It is controlled by its users and not by any central authorities. The supply schedule of Bitcoin is fixed and its inflation schedule is predictable. Being that the maximum number of coins is fixed, the supply of the coin is scarce and it is this scarcity that influences its market value.

Nakamoto programmed the block reward to decrease over time. While the USD has roughly tripled since 2000, the Bitcoin’s block reward goes through halving. Bitcoin was created amid the 2008 recession; thus we can be sure that its creations hard a little of political motivations. Some people even argue that it was created to give financial power back to the user rather than the government which sometimes fails to make decisions that are in the user’s best interest.

Many cryptocurrency enthusiasts believe that Bitcoin reflects Nakamoto’s political goals and beliefs. Bitcoin will reduce the power which banks and governments have on the monetary system if widely adopted. No central authority can create Bitcoin outside of its strict creation schedule.

How does a bitcoin halving work?

Bitcoin halving works majorly because of the network’s underlying Blockchain software which effectively dictates the rate at which new Bitcoins are created. After the mining process which had been explained earlier, the new coin is added to the Blockchain which in this case acts as a digital ledger. The Blockchain is programmed in such a way that it halves the reward received by miners after every 210,000 blocks.

How does the halving of bitcoin rewards affect the miners?

Unfortunately, the miners probably incur the most losses. Because of costs such as electricity and hardware. Some miners end up forfeiting the practice altogether if the price doesn’t rise to compensate, which reduces the processing power in the network. No matter what, the speed at which blocks are mined shouldn’t be affected as the software automatically adjusts the difficulty of verifying transactions to maintain a steady rate.

What will happen after all the 21 million Bitcoins have been mined?

After the maximum supply of 21 million Bitcoins has been mined, users will stop receiving new Bitcoins for verifying blocks. On the bright side, they will continue to receive transaction fees from payments as an incentive for verifying transactions. the last coin is expected to be mined in 2140 and at that point, the coins will become deflationary.

How does Bitcoin halving influences its price?

In 2012 when the first halving took place, people got to study Nakamoto’s unorthodox supply schedule closely. Until then, people hadn’t experienced any sudden decline of rewards so they had no idea what to expect. As fate would have it, the price started rising almost immediately after the halving.

The second halving would come four years later and it was highly anticipated. The second halving happened on the 16th of July, 2016. The price dropped to $610 which was a 10% decrease before it shot back to its original position. Even though the immediate impact on the price of Bitcoin was very minimal, the price increased gradually over the next year. Some believe that this increase was a delayed effect of the halving.

Experts argue the effect of halving from a demand and supply theory. When the supply of Bitcoins decreases, the demand does not change, it remains the same thus causing the price to increase. it is because if that theory that people are anxious for a price increase after the long-awaited third halving. Still, some believe that this third halving will not have any effect on the price because Bitcoin traders have had enough time to prepare adequately since they have known the Bitcoin reward would decrease all along. This is good thinking because if most people are aware of the halving in advance, they will buy Bitcoin in anticipation and push the price up before the halving rather than afterward.

When exactly is the Bitcoin halving 2020 going to take place?

The halving event does not have a fixed date. It largely depends on when 630,000 Bitcoins will be in circulation. On average, the mining rate of Bitcoins is 1 coin every ten minutes which adds up to 144 coins per day. The rate pf Bitcoin mining keeps fluctuating and therefore, the exact date on which the halving event will take place remains unknown.

How to trade during Bitcoin halving 2020

There are two main ways to trade Bitcoin during the halving; you can either buy the coin outright though an exchange or you can speculate the price of the coin using derivatives such as CFDs. There are several advantages to trading using derivatives the main one being that you don’t take ownership of the underlying coins. You can, therefore, trade without an account or wallet, go long or short and lastly you can effectively take advantage of the leverage.

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