The Real Facts Why Bitcoin Price Is Affected By Halving

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Recently criptonoticias published an interesting article that talks about how the halving event could affect the price of Bitcoin, and we have decided to translate that important information and generate a more detailed, commented and updated article for all the members of our community.

Basically the article tells us about two important facts. The first one is related to the position, being the most common fact is skepticism about the possible impact that the halving event could make with the price of bitcoin. And as a second fact, it is the historical position, because this event has coincided with increases in the price of bitcoin.

To begin, we will travel through the basic concept of what halving means. Then we will relate each fact that shows why this event is so important for the cryptocurrency market community. So, we want you to pay close attention to the following lines of text. And of course we leave you a good music.

What Is Halving?

The concept of halving is simple, explains another article from criptonoticias. Its name comes from the action of reducing something by half (half, in English). The first thing you should know is that it is not a unique Bitcoin phenomenon. 

Other blockchains, whose code is a modified copy of the Bitcoin code, have this mechanism as a measure of reducing mining rewards with a periodicity defined by a certain number of blocks resolved in the chain.

This event is mainly promoted for the reduction of inflation, where the article is clear by saying that unlike central banks, which have the power to issue more fiat currency and thereby generate higher inflation, cryptocurrencies tend to progressively decrease that emission. . They even have caps for total supply.

Also, the article explains that according to bitcoin.com, Bitcoin inflation is currently at 3.89%. In fact, since 2011 these figures have been falling year after year. Over the course, two halving have occurred and the difficulty of mining has been steadily increasing.

Most Anticipated Year’s Events

Halving or halving of the miners’ rewards is the one of the most anticipated events of this year in the world of cryptocurrencies, says the criptonoticias article, which will occur in the Bitcoin network. With that event, scheduled to occur every 210,000 mined blocks, the rewards for mining in Bitcoin will go to half of the current value.

With the decrease in the emission of Bitcoin that this third halving will entail, analysts and ecosystem enthusiasts are waiting for how the event can affect the price of the cryptocurrency. The positions in this regard are found.

Exponential Price Duplication

In another hand, says the article, some consider that the current price (which doubled in 2019) already had the influence of the event, scheduled for mid-May this year. Others think that the effect of halving on the valuation of bitcoin in the market has not yet been seen.

Some go to the extreme of considering that the cryptocurrency will have a considerable rebound after the rewards go from 12.5 BTC to 6.25 BTC per mined block.

For example, the CEO of Bitcoin Suisse, Arthur Vayloyan, thinks that the next halving is going to be the catalyst for a major new bull run. Interviewed by CNNMoney, he said that the best consideration about this year’s event would be to refer to the history of previous Bitcoin rewards declines.

Indeed, near each reduction there have been increases in the price of bitcoin. It happened in 2012, year of the first to halve. That year, Bitcoin increased in value from USD 5.27 and spent USD 12 before the event, which occurred in November of that year.

At that time, in November 2012, the popularity of the cryptocurrency was not even close to what it currently has. And neither was its market price, although it did maintain a sustained upward pace. The following year there was an important increase, with BTC closing 2013 above USD 700, reaching over USD 1,000 at times, in Buy Bitcoin Worldwide data.

In 2016, the price started just above USD 400. For the date of the second halving (July 2016) the value was about USD 650. Then it approached USD 1,000 again at the end of the year and in July 2017 it was around USD 2,500. At the end of that year came the biggest bullish career in the cryptocurrency market, with bitcoin approaching USD 20,000.

Behavior With Little Information

However, an investigation by Coin Metrics concludes that information is lacking to determine how halving will influence the price of bitcoin. In its report issued on December 24, Coin Metrics estimates that, although historically the behavior has been positive for the price of bitcoin, “the few historical instances […] deserve continuous study.”

One of the riskiest predictions is that of Tim Draper. According to him, after halving the price of BTC will reach USD 250,000. The risk investor said that such increase would come within 6 to 12 months after the reduction. The percentage of increase that this would represent exceeds 3,000%.

For CTF Capital, “the bitcoin supply and demand market is still in an immature stage.” Therefore, do not venture to predict possible price effects. However, they do also refer to the first reductions to analyze the effects that the event has historically had.

In a mature and perfect market, assuming that the level of demand remains constant, the price of bitcoin should be appreciated in known ranges every time its offer is reduced through a halving process.
CTF Capital

Mining Industry, Profitability And market

Starting from the basics, we can say that the profits of the miners once the rewards for each mined block are reduced would also be reduced by half, says the article in another part. Especially, if we take into account that almost 97% of those gains currently come from such rewards, as a recent Token Insight report outlined.

According to that report, only 3.07% of the profits in the mining industry come from the transaction fees that are executed on the network. Given this, various companies manufacturing mining equipment have been preparing to minimize costs for the event scheduled for May.

Companies like Bitmain, for example, have opted to significantly reduce the number of workers in their workforce.

There are several possible scenarios planned by personalities with mining activities in the ecosystem, it says too. For example, Andrew Kiguel, CEO of Hut 8 Mining, considered, when interviewed by Bitcoin Magazine, that the hash rate (the cumulative processing power of all miners in the network) could decrease even 50% compared to levels current.

However, so far, less than one semester of the reduction in rewards, the trend is still rising. To date, that power remains close to 120 exahashes per second, according to data from BitInfoCharts.

Returning to the price, there is the appreciation of Samson Mow, CSO in Blockstream. The executive considered towards the end of December last year that the price of the cryptocurrency would be clearly positively impacted by the halving.

Bitcoin is much larger and the exchange ramps are much more mature than four years ago the second halving, I would expect to see a price increase, if not exactly at the time of halving, then in the months to follow.
Samson Mow, CSO, Blockstream

Kiguel also expects an increase in the price of bitcoin. However, he thinks he will not be so tall. In any case, it is possible that the increase is between 50% and 100% with respect to the current value.

Halving Is Just Hashish

Another consideration in the article is that according to Billy Bambrough, an analyst who writes for Forbes, another event could have a greater impact on a hypothetical cryptocurrency revaluation. It refers to the inclusion of the signatures Schnorr, Taproot and Tapscript by means of a soft fork.

In an article published on January 19, Bambrough postulated the possibility that the incorporation of these new features that seek to improve aspects of privacy and scalability are “a more important development on the horizon” compared to halving.

Community monitoring of these new developments, which could be added in the last quarter of this year, could have a positive impact on the price of the cryptocurrency if it is considered an important advance for the network, according to the text published in Forbes.

For now, the truth is that expectations related to halving rewards are high. Essentially, because from block 630,000, the market will go from receiving 1,800 bitcoins daily to receiving only 900.

Your Opinion The Best Fact

Whatever the prediction of the price of Bitcoin before and after Halving, we personally understand that this event is done to reduce inflation within the Bitcoin network. We recognize that the term inflation is being one of the biggest problems in the world economy and because it becomes important to protect the importance that cryptocurrencies are having right now.

That is why we want to declare a moment of Bitcoin pizza and know your opinion about this article. If you have one, please comment below, it costs nothing to do so. We thank you in advance for the support.

See you in the next story! With love ?? Rubika Ventures Team!

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