Traders and miners of cryptocurrencies are gearing up for the first crypto bitcoin halving in May 2020. This event is expected to happen between November 11th and November 18th, according to different estimates. Should you be afraid of this case, and what should you do to prepare?
What Is Bitcoin Halving, And How Does It Work?
The Blockchain is used to power the mining algorithm. This means that the next mined block is linked to the previous ones in a series. The following information is included in the blocks:
- The hash of completed transactions
- the number of transfers
- the wallet addresses involved in the transaction
Every 10 minutes, a new block is created on average. The miner (or mining pool) earns a 12.5 Bitcoin reward for extracting a block. This number was 50 BTC until 2012. Then came the first halving, which was a halving of remuneration. After every 210,000 blocks, the cryptocurrency algorithm contains such a case. As a result, miners received 25 coins per block in 2012, but just 12.5% in 2016. Bitcoin is halved every four years on average. The mining incentive will be 6.25 BTC beginning in mid-May 2020.
When Will The Next Bitcoin Halving Take Place?
The “Cryptocurrency Gold” mining algorithm is set up in such a way that it can generate 21 million Bitcoins. The incentive reduction was designed to prevent all coins from being collected and distributed to the market at the same time.
The exact date of the event is determined by the mining equipment’s pace. The development of new blocks is open data. As a result, websites that monitor the process and provide a countdown have been developed.
What Effect Does Halving Have On Bitcoin’s Price?
There is insufficient data to make reliable estimates. The first two halvings resulted in a price spike for several months, followed by a price decline. However, the value of Bitcoin has risen overall. It’s related:
- With respect to the psychological effects of deficiency;
- With a real decrease in the first cryptocurrency’s inflation rate. It will be configured to drop from 3.65% to 1.87%.
How Does Halving Affect Mining And Miners?
The miner’s reward for a new block is $ 112,293.75, based on the existing BTC value of $ 8,983.5. If the price stays the same after being split in half, the balance would be $ 56,146.875. The reduction would not affect the network as a whole, but it will mostly affect small miners. A decline in the number of miners is anticipated as profitability plummets. Smaller players will move to higher-returning currency mining. Due to lighter algorithms, mining other coins can be more profitable even with a lower token cost. As a consequence, the speed at which a block can be completed by solving mathematical problems is much faster (as well as the profit of network participants).
Excessive centralization would result if only large businesses or pools that mine coins on a large scale remain on the Bitcoin network. This means that transaction protection will suffer as a result. It is possible to rewrite the Blockchain protocol by acquiring 51 percent of the network’s strength. This has never occurred in the token’s history, but it is theoretically possible.
Traders are more likely to face the following effects as a result of increased network centralization:
- Transaction pace is slowing down
- Higher transaction fees
Bitcoin is increasingly stabilising, as shown by the two recent halvings. In the long run, the occurrence could result in a rise in the token’s price. Coins can enter the market at a slower pace as the rate at which they are created decreases. As a result, inflation will plummet.
What Would The Price Of Bitcoin Be After The Halving?
Raoul Pal, an economist, predicted that the token will fall in value on Twitter. He explained this by saying that 81% of the current BTC on the market is acquired at a lower price than the current one. The price is often falsely inflated by the public’s enthusiasm. Simultaneously, long-term growth of up to $ 40,000 per token is possible. The wedge-shaped graph of the coin’s actions served as the base for this prediction. Prices are expected to grow during the year, according to technical research.
Only if Bitcoin reaches two resistance thresholds, according to a financial analyst at investment company Raison Asset Management, can it reach a new all-time high. These levels would be $ 12,500 and $ 14,000, according to Nikolai Klenov. With the current course of events, the token will cost about $ 20,000 by the end of the year.
Some economists are notorious for making outlandish predictions. Since traders are afraid of losing out on gains, the cryptocurrency’s price will rise to $ 100,000 by the end of 2021, and then to $ 200,000.