Anyone deep into the crypto might be aware of the next big event in the crypto world—the bitcoin halving. Set to occur in May 2020, it’s grabbing the headlines and surely the blockchain industry is paying attention. Well, it’s not something new; bitcoin is already halved twice in the last 10 years. But the question is what impact it’s going to make on the price this time. And how the cryptocurrency will act in the market as the reward for generating it decreases? Let’s dig deep to find out the answers. But first, let’s begin with a bit of basic.
A Brief Overview of Bitcoin Halving
As we know, unlike Fiat currencies, Bitcoins are not issued by any specific single centralized authority. Instead, they are mined. A “block” of bitcoin transactions is verified by the miners every 10 minutes before getting added to the bitcoin blockchain. This is a complex task that takes a lot of effort, power and expensive specialized hardware. So, why miners will perform such a task? Well, because every time the new bitcoins are generated, the miners get those as reward which is also known as the “block reward.”
When Bitcoin’s creator, Satoshi Nakamoto mined Genesis Block, the very first block of bitcoin, the block reward was 50 BTC. Back then, the competition to generate new blocks was so low that miners could update the Bitcoin ledger easily using a regular desktop or laptop. However, when more miners joined the network, the complexity increased. The simple machines could no longer keep pace with the rising competition and then begun the arms race. With the growing number of keen miners and the tremendous increase in the required tech for mining, the scarcity of Bitcoin could be in jeopardy.
So, to keep the inflation in check, while designing the Bitcoin protocol, Satoshi programmed block rewards to decrease overtime and slowed down its distribution through halving. In bitcoin halving, the reward for mining BTC is set to decrease by 50% for every 210,000 blocks. Since on average, 6 blocks are found within an hour, the halving event is scheduled to occur once roughly every four years.
While the block reward was 50 BTC during the first halving, it went from 50 to 25 BTC during the second halving. And now the block reward is only 12.5 BTC and it is again going to be cut in half on May 20, 2020, to 6.25 BTC.
Let’s Analyze the Bitcoin Halving Over the Years
When the first bitcoin halving occurred in November 2012, BTC was only worth about $11 USD. But in 2013, the BTC rate skyrocketed to $1,100— a 9,900% increase. Though soon the price crashed down to $220-$240, even with the crash, it witnessed the growth of 1,900–2081% from the pre-halving price.
On 9th July 2016, the real bull race started when the second halving happened and the BTC price reached the $580-$700 range. After the second halving, the price started increasing slowly toward the end of the year. And then we know what happened in 2017. We witnessed the largest crypto bull run with a bitcoin price around $20,000 USD—an incredible 8,991% increase from the previous halving.
In both scenarios, a massive growth was seen after 12–18 months of the halving, followed by a price that was much lower than the all-time high. However, the decreased price was still much higher than before.
How 2020 Bitcoin Halving Will Impact the Price of BTC?
The next bitcoin halving is expected to commence on 18 May 2020 when the block reward will fall from 12.5 to 6.25 bitcoins. So, will history repeat itself and BTC will see the increase of another 9–10,000%? Well, it’s too early to say for sure. But we can certainly draw conclusions by analyzing the current situation and comparing it with historical data.
If we have a look at the BTC chart and its entire history, we can notice certain patterns that have been repeated several times. BTC rate always increases before the halving and then the market enters into a parabolic growth phase that lasts about a year. And then we see the correction and a prolonged bear market. But one thing that is worth to notice is: the BTC rate never went down to the initial values even after shocking price kickbacks.
So, if the interest in Bitcoin remains the same, the price of bitcoin is more likely to increase in 2020. According to Tom Lee, Global Advisor’s Funds Head of Research, Bitcoin can go up to $91,000 by March 2020. BeinCrypto, a renowned cryptocurrency news outlet also predicts a bright future of bitcoins in the post-halving era.
Unfortunately, it is hard to predict the exact result or numbers when it comes to the next bitcoin halving. But no matter what the future holds, one thing is certain that this upcoming halving will be the most important story for the crypto space. Hence, it is recommended to keep an eye on all relevant variables related to bitcoin’s value to make the right decisions when it comes to buying or selling.