What Bitcoin Halving is

What Bitcoin halving is and what it means for the price trend?

In order to better understand what Bitcoin halving is and what will change after this operation on the price and in the entire market, you must necessarily take a step back and ask yourself how the most famous cryptocurrency is produced. The maximum number of bitcoins in circulation, for will of its own founder and for the characteristics of the technology that backs it, will never exceed the magical number of 21 million coins. Once reached that threshold, the mining process will stop, so that the Bitcoin supply will remain constant. The Bitcoin mining process has often been compared to the process of issuing a fiat currency by a central bank. But the difference is clear. If a fiat currency supply varies according to the discretion and the monetary policy decided by the central bankers, the Bitcoin’s supply is established a priori. A way to avoid to inflation the price.

The extraction of the crypto currency occurs thanks to some “miners”, through sophisticated equipment. Miners are rewarded for this activity just by taking possession of a given amount of Bitcoin. Halving simply means halving their reward, and this effect produces a decrease in the number of BTCs issued. By the simple law of supply and demand, the value of each coin increases.

Through halving, the rate of extraction is slowed down, thus preventing the 21 million quota from being reached and making the price less exposed to depreciation risks. Making precise predictions about the dates on which halving takes place is not easy, as this happens every 210,000 blocks. It is therefore necessary to wait until 630,000 blocks have been reached, which will take place between 9 and 12 May. At that time about 18,300,000 BTC out of a total of 21 million will be in circulation and the reward will drop from BTC 12.5 to BTC 6.25.

Since the reward is the only way to create new coins, halving the number of new BTCs created will result. According to many experts, the lower offer could have a positive effect on the price, considering that in the two halvings of 2012 and 2016 the increase has always occurred. However, other analysts believe that halving may cause the price to fall, as miners may start selling because of the sudden doubling of their costs.

It is estimated that Bitcoin’s fourth halving will reach the 840,000 block in 2024 or so. The fifth and sixth will probably have to wait until 2028 and 2032.

Related Articles

Crypto carry trade (part one)
The current international monetary environment is characterized by ultra-expansionary monetary policies undertaken by…

Read more >
Passive and Aggressive orders
In forex trading, traders often use passive and aggressive orders in their daily…

Read more >
The Rate-of-Change (ROC)
In the technical analysis of forex markets, the Rate-of-Change (ROC) is a momentum…

Read more >