Bitcoin Halving will happen in 2020. But what is halving? And how does it affects the price of Bitcoin? BTCMEX takes a look at previous Bitcoin halvings in the traditional Throwback Thursday. Dive in!
Throwback crypto Thursday with BTCMEX
The Cryptoverse is anticipating 2020, as the Bitcoin halving will happen in May. What does it mean for the community of cryptocurrency traders, miners and enthusiasts? How does it affect the price movement? And how did previous halvings affect the Bitcoin price? And what is halving? BTCMEX answers these questions in this week’s Throwback Thursday. Dive deep in the history of Bitcoin and crypto markets with us!
Halving is a process of dividing the generated reward for mining the Bitcoin block in half. It is necessary to maintain the total number of Bitcoins, which according to the protocol can not exceed 21 million.
Satoshi Nakamoto’s idea was to create a self-sustaining system, so Bitcoin is designed to simulate commodities like gold that has a limited supply. Every year it becomes harder and harder to mine gold, that’s why it retains its value. Financial analysts predict that the gold-backed cryptocurrency will drive the next global reset.
The idea of self-sustainable value lies behind Bitcoin. The blocks are essential parts of the Bitcoin blockchain where all transactions are recorded. Digital currency miners are getting a reward for every block mined in Bitcoin. To put it simply, mining means solving a mathematical problem using special technical equipment. For every block’s problem solved a miner gets a reward in BTC. The more miners are fighting for a reward, the harder it becomes to solve the problem.
If coins are unlimited in number or created too quickly Bitcoin will eventually lose its value. By reducing the reward halving naturally solves this problem.
It’s important to know that halving Bitcoin is scheduled at the height of the block, and not the specific date and happens every 4 years. It occurs every 210,000 blocks and reduces the reward by 50% each time. The day, when the number which miners are awarded per block is halved, is called Carving.
In 2009 the initial mining reward was 50 BTC for a block. The first halving event took place on 28 November 2012, the reward was reduced to 25 BTC. The current award, which was set on 09 July 2016, is 12.5 BTC. The next halving is predicted to happen in May 2020, and the reward for mining a block will be 6.25 BTC. It is expected that all Bitcoins will be mined in 2140.
But how does halving affect the Bitcoin price? Reducing the reward by half affects the number of miners who receive Bitcoin rewards, and has historically had a positive impact on the price of BTC in the long run. Mining is an energy-demanding and costly process while the block reward is the main incentive for mining. The market didn’t see the significant BTC price drops after halvings as they might make miners unprofitable.
The first halving reward drop led to a famous 2013 price rally - from USD 13 to USD 260 per Bitcoin in four months. On the day of 2016 halving the BTC/USD price was at 647 before it went to an all-time high USD 19,891 in December 2017.
What to expect from 2020 halving? BTCMEX prepared opinions, market analysis and crypto insights for you in tomorrow’s Futures Friday. Stay with us, don’t wait for the next halving, and trade Bitcoin today!
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Please note, that the article is a part of BTCMEX Blog, the views and opinions expressed here are the contributing author’s only, and do not necessarily represent the views of the company.
Julia Bulakh for BTCMEX