Your guide to The Bitcoin Halving — What you’ll need to know.
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The Bitcoin Halving, or The Halvening as some seasoned experts choose to call it (in fact, 17.6 percent of respondents on Twitter), is upon us.
As one of the most anticipated events in the crypto space, we figured we’d cover everything you would need to know so that you’re armed with the knowledge to zealously observe/curse The Bitcoin Halving.
We also chatted with professional crypto trader Dave Vizsolyi from DV Trading to understand how the price of BTC might be affected by The Halving.
Key definitions: Before we get started
Let’s get down to some basics to understand what The Bitcoin Halving entails.
What is Bitcoin mining?
Bitcoin mining is conducted through specialized computers that are used by miners to secure the network and process bitcoin transactions.
Essentially, bitcoin mining has three main goals: to issue new bitcoins, confirm bitcoin transactions, and provide security for the bitcoin network.
What is the blockchain?
Miners process every transaction by solving a computational problem that enables them to link together blocks of transactions. These blocks of transactions comprise the blockchain.
For a transaction to be included in a block, it has to be embedded into the blockchain. The larger the BTC transaction, the more confirmations are typically required to ensure that the transaction cannot be reversed.
Since it takes more than 51 percent of the network hash power to reverse bitcoin transactions, more miners mining means greater network security.
What are bitcoin (BTC) rewards?
But where there is a will, there is a reward.
For every transaction a miner confirms on the blockchain, they receive a reward in the forms of newly-created bitcoins and transaction fees. Miners are rewarded bitcoins every 10 minutes.
While traditional currencies issued by central banks can simply be printed, the bitcoin issuance rate is controlled by a code that cannot be altered. As you can imagine, it’s heartwarming to know that bitcoin can’t just magically appear from thin air.
What’s the 21 million upper cap?
The maximum number of bitcoins that can ever exist is 21 million.
Unless the bitcoin network protocol is altered, the final bitcoin is predicted to be mined at around year 2140.
But what is The Bitcoin Halving?
The Bitcoin Halving marks the point when bitcoin rewards for verifying transactions on the blockchain is cut by 50 percent.
The number of bitcoins introduced in each new block every 10 minutes will be cut from 12.5 to 6.25 BTC.
When is The Bitcoin Halving?
May 2020.
Has The Bitcoin Halving happened before?
Satoshi Nakamoto designed Bitcoin so that the block reward is halved every 210,000 blocks. This translates into every four years, roughly.
There have been two Bitcoin Halvings before this anticipated third:
An in-depth look: An interview with crypto trading expert Dave Vizsolyi on The Bitcoin Halving
Some people claim that The Halving is priced in, is this a widely held view given the efficient market hypothesis?
Dave: It’s hard to verify this theory given all the noise in crypto, especially now. It would be impossible to go back with hindsight to see if the Halving was priced in because we had a 50 percent drop in price six weeks before The Halving.
There was a ton of noise and now there’s even more noise to prevent anyone from claiming to be right or wrong; the volatility will drown the evidence out.
How have perceptions of The Halving changed now that we’re experiencing the effects of COVID-19?
Dave: Before we had the initial big drop in crypto, there was an idea in the space that crypto is a safe haven. We now recognize that crypto is more similar to gold in that it will dump when holders have to make margin calls. In the aftermath of the drop, we saw that crypto rose a bit faster; that’s what we’ve also seen with gold.
When the crash happened, it got to everyone. You needed cash to make margin calls on loans and assets in other markets. It was a big capitulation for everyone.
When the price dropped that much, you saw an acceleration of the fact that miners that would have become less profitable in May suddenly became less profitable a month earlier. That pushed up some plans and we saw some capitulation in terms of some miners starting to sell.
How will The Halving affect the price of Bitcoin in the long-term?
Dave: The Halving will be positive for price in the long-term since there will be less selling pressure. Miners have to pay fixed costs. For every bitcoin that they mine, they need to sell some portion of it to pay for things. If they’re getting less and less rewards to sell, there is less bitcoin coming in the market on the supply side.
But why trade Bitcoin (BTC) on Newton?
For starters, we’ve got the best prices in Canada, offer no-fee trading with an ever-expanding list of coins, and offer institutional-grade custody through our partnership with Balance.
Translation: we’ve got the best prices, are always focused on growing, and have a commitment to keeping your assets secured.
So, really, why not? 😉
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