Bitcoin’s block reward is halving. The influence this event will have on its future is anybody’s guess.
Whether you’re calling it the halving or the halvening, it’s the same news: bitcoin mining rewards are being cut in half, from 12.5 BTC per block to 6.25.
What is the Halving?
The halving process is used as a tool to combat inflation within the bitcoin ecosystem, and it refers to the reward for successfully mining a block being cut in half. The halving timeline occurs approximately every 4 years, after 210,000 blocks have been mined on the bitcoin blockchain. After the 2016 halving event, the blockchain went from mining 3600 BTC down to 1800 BTC daily. After the 2020 halving, a mere 900 BTC will be mined on a daily basis.
The halving of the supply of “new” bitcoin means that the coin becomes more rare. The laws of supply and demand state that constant demand for an asset will result in a rise in its value and price. Much as seen with the previous two halvings, the third halving could potentially mean a hike in the price of bitcoin.
Will history repeat?
A year after the 2012 halving, bitcoin jumped an astonishing 7,562%; however, that increase would prove unsustainable in the coming years.
By the 2016 halving, bitcoin was hovering around $600 (about 45% less than in 2013 but still higher than pre-2012), and the price didn’t fluctuate too much on the actual day. But, just like the first halving, a year later the price rallied to an all-time high of $19,783, and then fell in the coming years.
So, if history repeats itself, we may see a spike in bitcoin’s price around 2021, but we would know that spike is unlikely to continue through to the 2024 halving.
What we can say from looking at the data is that, so far, each halving has initiated a price increase in the following year. If the price tops $19,783 in 2021, this may be indicative of true, long-term growth for the currency.
What the experts say
There are many voices in this conversation, but we’re far from reaching a consensus. Here’s eToro’s US Managing Director, Guy Hirsch, on the bitcoin halving…
“The bitcoin halving is a significant milestone for the most ambitious and trusted project of decentralized money. As opposed to the Fed, an organization influenced by political pressure to inject or remove money from the overall supply, the bitcoin protocol has a monetary policy built into the code and transparent to everyone. It is not bound by political or other artificial manipulation, making it sound money. In that sense, the dollar should be less trustworthy, and yet the trust in it is still way higher than bitcoin among the general population and the world at large. As time goes by, we think more people will understand that bitcoin can not be manipulated like the US dollar can. Once more people understand this and trust grows, we will see adoption and possibly price changes in this “digital gold.”
The price of Bitcoin showed exponential gains following the previous halvings in 2012 and 2016, turning the up-coming event into a community holiday of sorts. The pre-programmed cutting of the block reward is perceived by many as a key driver of potential upward price action, since it increases BTC’s market scarcity. Bitcoin has a fixed supply of 21 million BTC, with roughly 18.3 million mined to-date.
But most importantly, this halving is a testament to the resilience of bitcoin’s fundamental value proposition of a permissionless, inflation-resistant store of value.”
TL;DR?
Check out our video explaining what’s happening with the halvening.
Enter our Halving Giveaway!
@eToroUS is running a $1000 giveaway to celebrate the bitcoin halving. Two lucky winners will be selected on Friday, May 15. Each will get half of the $1000 prize.
Here’s how to enter for a chance to win:
- Follow @eToroUS
- Retweet their official entry post (to be posted on May 11) and reply with your eToro username.
We’ll pick the winners at random and $500 will go in their respective eToro accounts.
US customers only! Full terms and conditions here: https://go.etoro.com/en/the-halvening-giveaway
If you don’t already have an eToro account, sign up now.