What is Bitcoin Halving-Will it Work?

what is bitcoin halving

Bitcoin’s halving consumes investor interest in the industry. What is Bitcoin halving and what does it mean for the cryptocurrency? In this article, I will explain to you what is bitcoin halving and then I will present to you the five scenarios regarding Bitcoin’s future.

What is Bitcoin Halving?

Every ten minutes, new Bitcoins are mined from the Bitcoin network. During the first four Bitcoin years, the number of these Bitcoins produced every ten minutes was 50. Every four years that number was divided by two. In 2012 the number of Bitcoins produced fell from 50 to 25. In 2016, it also fell from 25 to 12,5. Now, It will drop from 12,5 to 6,5 Bitcoins produced every ten minutes.

  • Bitcoin halving commencing date: 18/5/20
  • Bitcoins produced: 6,5 every ten minutes.

1-A Handful of Corporations Could Control Bitcoin

The miners will see a sharp fall in their rewards. (50%) This will be due to halving, or could also be due to an unexpected drop in Bitcoin’s value. This could cause heavy losses to mining corporations. As a result, their owners will have no option but to cease operations.

In addition, the rewards decline could cause further harm, as the verification of each block could take hours. However, I don’t think that scenario has any chance to take place. We already had two halvings in the past and we also had up to an 80% drop in Bitcoin price. Today’s Bitcoin miners are large corporations, fully professional thus, it’s not easy to just “pull the plug”.

2-Bitcoin Price Increase

Many economists and investors consider Bitcoin to be a commodity and thus, according to economist’s Safedean Ammous algorithm Stock-to-flow, including other predictions, they all agree its price will see a substantial increase. According to the Stock-to-flow algorithm, Bitcoin will touch the $100,000 mark at least one time.

3-Investors Buy the Rumors and Sell the News

This is a possible scenario, due to great anticipation for substantial gains after Bitcoin halving. When investors see chances for substantial gains, they always jump on the bandwagon and once they have profited enough, they are the first to sell.

It is common practice. When there is a big event they will always be there and they will leave exactly when market enthusiasm is at its highest level.

There was a similar event in Litecoin’s halving. Litecoin lost 2/3 of its value only four months after its halving. Nonetheless, at that time most cryptocurrencies suffered losses. The fact is many investors have adopted a similar strategy because Bitcoin’s halving has been heavily promoted.

4-Massive Bitcoin Sales from Miners

There is no doubt halving will cause an increase in Bitcoin production costs. If Bitcoin’s value is equal to or below mining costs, miners have no option other than selling. If not, they will have to deal with heavy losses.

In this case, Bitcoin’s value drops suddenly and sharply as it did in March 2020 then, the fall in miners’ rewards along with Bitcoin’s value will decline. That could lead to a massive Bitcoin sale. A massive Bitcoin sale means further value decline.

5-No Significant Changes

According to many analysts, Bitcoin’s halving will not have a significant effect on its value. Daily fluctuations between 1% and 5% are usual, whereas further fluctuation will definitely be seen as in effect. We might not be able to see this immediately, but after a few months, the data will be there.

Final Words

What will actually happen to Bitcoin’s price after halving remains to be seen. There will be fewer Bitcoins produced, that is certain, we do not know whether Bitcoin demand will stay the same, will drop, or rise.

Will miners continue to operate with new more efficient hardware or they will have to cease operations? Some analysts argue halving has already passed in the Bitcoin market.

My view for halving is that long term, it will have a positive effect not only on the Bitcoin market but on the cryptocurrency market as a whole. Most predictions are just predictions unfortunately, there is not enough data for us to form a definite view, especially now in the middle of the COVID-19 pandemic.

>>>>>>>>>>>> Additional reading: Cryptocurrencies, What is Bitcoin IRA, Top cryptocurrencies to buy.