What Does Halving Mean For The Price Of Bitcoin In 2020
By trisha suri on ALTCOIN MAGAZINE
As we get closer to 2020, I’ve been wanting to talk about this topic for some time now. As I go down this path of becoming bullish on Bitcoin, I want to share my learnings and experiences. I’ve gone from being very skeptical of Bitcoin to transitioning into an investor. I’ll link some resources that benefitted me through this journey down below.
One of them being, Shameless Maya’s introduction to Bitcoin Cryptocurrency for Beginners. She breaks everything down in such a digestible way and I definitely encourage you to take a look at her video if you want to get a high-level overview of what Bitcoin is all about, how it started, who created it, and why.
For those that are investors, or familiar with the current state of Bitcoin, you’ll know that it’s extremely volatile and in 2019 alone has gone all the way up to a $13k valuation. So that brings me to my main point. May 20, 2020, an event will take place that could change the value of Bitcoin as we know it. And what I’m talking about is “Halving.”
What’s weird is that although there’s a ton of media attention around Bitcoin, not too many people are talking about Halving, even though it already happened twice. So that’s why I’d like to take this time to dig into a bit more as I, myself, attempt to understand this phenomenon and movement.
The Bitcoin Block Transaction Halving Process
As a quick reminder, Bitcoin is algorithmically limited. Unlike “fiat currency” which is backed by the government that issued it. For example, the United States dollar or the European Union Euro. These types of fiat currencies can be and regularly are printed at will. On the other hand, a finite amount of Bitcoin can and will be produced. Specifically, there will only ever be 21 million bitcoins in existence. This means that once they have all been mined, no more can ever be created. This makes it scarce by nature with a deflationary effect over time.
So what does this mean? Every 10 minutes, a “block” of bitcoin transactions is solved by miners and added to the bitcoin blockchain. This demands a ridiculous amount of electricity and really specialized hardware. Miners opt into taking this on because they receive a reward every time they generate these blocks and add them to the circulating supply every 10 minutes. As we know, in the early days, each block was worth about 50 BTC. That means every time a miner added a block to the blockchain, they would receive 50 BTC. Since then, the block reward has been halved twice. This halving event occurs every four years or at 210,000 blocks.
According to the pundits, when this halving process occurs, it tends to have an effect on the BTC price. Good or bad? Hmm…
Correlation Between Halving And BTC Price
IMO, the halving process is the trigger that reminds everyone that the supply of BTC is reducing. And when the supply reduces, the demand goes up. If fewer and fewer BTC are being generated, then the reward also reduces at every 210,000 blocks issued to the blockchain. Moe Adham, Founder of BitAccess and Council Member at Forbes, explains this phenomenon the best way possible. He expresses that “the first time, BTC went from around $11 to around $1,100 and back down to $220. The second time, BTC went from around $230 to around $20,000 and back down to around $4,000.” According to him, there is a correlation between the upcoming Halving event and a volatile price fluctuation afterward. Take a look at his analysis here.
The Expectation Of The Halving Effect In 2020
I will say that because the cryptocurrency industry is still in its infancy, it’s really tough to predict the ups and downs of Bitcoin. So I can’t really say one way or the other, what’s going to happen. However, looking at the past two halving events, it does appear that the price has skyrocketed and crashed back down. If anything, it adds to its volatility and to be honest, I’m excited to follow along as the new year approaches to see if we can uncover any new trends.
With Gratitude,
Trisha
ps. I’m by no means a financial investor so please note that anything I discuss is an opinion and personal thought. If you’re interested in investing in Bitcoin or any cryptocurrency, I highly recommend you do your own research and talk to a financial advisor or expert.
