Bitcoin halving effect: What effect will it have on price?

The total supply of Bitcoin is 21 million. The block rewards for Bitcoin are gradually decreasing, and the reward for every 210,000 blocks is halved. The bitcoin mining incentive for miners is essentially the way in which bitcoin is issued. The time interval of each 210,000 blocks is calculated according to the time interval of bitcoin output of about 10 minutes, and the time interval of halving is about every four years. The next halved block height is 630,000, and the expected time is around May 19, 2020. At that point in time, the block reward will be directly reduced from 12.5BTC to 6.25BTC, which is the new 900BTC issued every day, instead of 1800BTC. The daily reduction is very considerable. According to the current price of more than 10,000 US dollars, for the miners In other words, it is a reduction of $9 million in revenue a day. It will continue to be halved by 2024, that is, only 3.125 BTCs will be awarded for each block, which will be reduced.

So, will the halving of Bitcoin affect the entire encryption industry? If there is an impact, what effect will it have?

What is the impact of halving rewards on bitcoin prices?

 

History does not repeat, but it has its rhythm. Bitcoin had two halved events in 2012 and 2016. In the past two halving events, we have seen the halving effect of a certain pattern. Of course, history can be analyzed, but the future is difficult to predict. The future things can only be said to be probabilities, not necessarily.

On November 28, 2012, the first halving event in the history of Bitcoin occurred. The price at the time of halving was around $12. After the halving incident, it took 369 days, that is, until December 2, 2013. On the day, Bitcoin reached a record high of around $994, an increase of nearly 8000%.

On July 9, 2016, Bitcoin suffered a second halving event, halving the price at around $650. After the halving incident, it took 526 days, which is December 16, 2017. The historical high was around $19,500, an increase of nearly 3,000%.

The Blue Fox notes found that after a halving period, the first time was about a year, and the second time was about a year and a half or so, reaching a record high, about a year and a half after halving, although there were ups and downs. But the general trend is upwards.

(Price Trends, Source: GrayScale Investments)

Not only that, but before the halving of Bitcoin, you can see a gradual upward trend. Bitcoin price changes have begun to brew in the first half of the halving period.

The Blue Fox notes found that from the previous two halving, the bull market was opened before and after halving, and reached the peak in the year or half of the year after the halving, then the third halving will not Have the same rules? First, will the third halving break through the new high and have a huge increase on the basis of the original? Second, if it will rise, will it take longer or shorter time to reach a new record?

The first time from halving to the new high of 8000%, and the second time from halving to a record high, it has also increased by about 3,000%. Now there are more than 10 months from the halving time. In the previous rhythm, the overall trend is a slow rise. If the halving is still able to maintain the current price of more than 10,000 US dollars, then the third halving can be based on historical experience, even if the historical high has a 1000% increase (less than Before the second 8000% and 3000% increase), it will reach about 100,000 US dollars. This means that the market value of Bitcoin is at least $1.7 trillion, which is not small. From the current point of view, this market value is a bit crazy, more than the company's largest market value in human history. But what happens from a future perspective? No one knows.

Second, the first time from halving to a new high, brewing for a year, and the second time brewing for nearly a year and a half; this time the maximum point of brewing will be longer, or will be more short? If you follow the last two experiences, at least one year or a year and a half later, it means that the peak period of the bull market will not arrive until May or November 2021. If you need a longer brewing time, maybe it is at 2022. Only then will there be an opportunity to reach the peak. As the price rises, will the increase be lower? According to historical experience, due to the large price base, the extent of the increase will decrease, but how much or will not repeat the previous experience. No one knows, can only wait. Because the factors for each trigger are different, the previous track cannot be completely copied.

So, is it possible to not play cards in accordance with the regular routines, such as a big drop or other circumstances? It is also possible, especially before the halving and the halving. If history is the same every time, it will be boring. One of the bitcoin values ​​to be seen is itself supported by computing power, most of which is converted by energy. That is to say, bitcoin is costly. Due to the existence of competition, its marginal cost and marginal benefit will eventually tend to be balanced.

This means that with the halving, as the bitcoin hash rate continues to increase, the production cost of bitcoin will increase substantially. If the price of bitcoin does not rise, then the cost of mining cannot be supported. Will enter the dilemma. The current transaction fee only accounts for a small portion of the miner's overall income. Recently, the bitcoin miner's daily income is about 20 million US dollars, and the overall income of the fee is less than 1 million US dollars, and the trading fee cannot support the mining industry. From this perspective, halving bitcoin will also have an important impact on the bitcoin mining industry.

Will halving the reward lead to a decline in computing power?

From 2009 to 2012, the reward for each block is 50 BTC, and about 7,200 BTCs are issued daily; during 2012-2016, the reward for each block is 25 BTC, and about 3,600 BTCs are issued daily; from 2016 to 2020, each district Block rewards are reduced to 12.5 BTC, which is the current reward. 1,800 BTCs are issued daily; from 2020 to 2024, block rewards continue to be halved to 6.25 BTC, and 900 BTCs are issued on a daily basis, thus gradually halving. The miners' BTC awards are reduced every four years. If the price does not rise, it means that the income will be halved.

Only when the price rises can the loss be offset. But the price increase is not a certain thing, and halving is a key node for the mining industry. If the income cannot maintain a certain level, many small and medium-sized miners may leave the mining industry. Therefore, halving bitcoin may also lead to further reshuffle in the mining industry.

At present, the bitcoin hash rate has not fallen sharply because of the previous decline in the currency price. After a certain decline, the overall trend is still rising, and currently exceeds the calculation power at the peak of the price in December 2017. Even a halving effect will not bring a sudden drop in computing power. After the last two halvings, there was no sudden drop in the hash rate.

(Source: blockchain.com)

The Blue Fox notes found that historically, halving the block reward did not lead to a reduction in the mining hash rate. From the last two, the reason why the hash rate did not drop was mainly due to the increase in bitcoin prices. This led to the fact that the miners did not take measures to remove the bitcoin from half.

Conclusion

If you follow the previous two halving effects, Bitcoin will rise steadily before halving (there will be fluctuations during the period), and after the halving, the bull market will be officially launched, which may take up to a year to a year and a half, or even more. For a long time, there are fluctuations during the period, but the trend is rising. As the rising potential energy increases, it attracts more interest from newcomers or institutions. With the help of various propaganda, it finally reaches the peak. At the same time, as the price increase offsets the halving of the reward, competition in the mining industry continues, and the hash rate is still growing.

This is the halving effect of Bitcoin, but the historical trajectory will not be repeated. What will happen in the future? Will the halving effect of Bitcoin in May 2020 continue? What do you think?

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Risk Warning: All articles in Blue Fox Notes do not constitute investment recommendations . Investment is risky . Investment should consider individual risk tolerance . It is recommended to conduct in-depth inspections of the project and carefully make your own investment decisions.