What is a Halving and how does it affect the Cryptocurrencys market?
Image of Canva
One of the most important processes in the economic system of a cryptocurrency with a Proof of Work algorithm is the "Halving". Many have asked me what will happen to Bitcoin when the famous Halving takes place, and it's that it's actually a decisive process that marks the issuance of Bitcoin coins and therefore their deflationary state. This way, in this post, I intend to explain what will happen in May with the so-called Bitcoin Halving and how it will affect the crypt coin market.
What is a Halving?
Halving translates as an automatic event that occurs approximately every 4 years and that occurs just when the network has produced 210,000 blocks, in which the reward for mining a crypto currency is reduced by half and that in turn reduces its emission. This was created to encourage mining through PoW (Proof of Work), all because the amount of Bitcoins that can exist is finite and is set so that only 21 million Bitcoins are emitted, no more and no less, that's why BTC nicknames it as an active refuge with a deflationary state that in time will revalue.
Not like Fiat money, which has no control over issuance, but every time the Federal Reserve, in conjunction with the Central Bank of a country, decides to print a lot of money without any control, which results in more inflation and more debt, a situation that is currently happening mainly in countries like the United States.
Behind what is Halving, there is always a question mark, which is
When will the last Bitcoin be mined?
Answering this question is complicated, because it is quite difficult to predict. Bearing in mind that at the current capacity of the system, 12.5 new Bitcoins are produced every 10 minutes, which is proportional to 75 Bitcoins every hour, which, multiplied by 24 hours, would be 1800 new BTCs a day, we have another question mark for this, however:
How many are produced per year?
We simply multiply the 1800 BTC derived from one day by the 365 days of the year, and that gives us 657,000 new Bitcoins.
Assuming this to be true, we have that in about 6 years, the 21 million Bitcoins would be mined, not taking into account the time in which the reward for each mining block is halved by the "Halving", because, when this whole process we call mining started, for each block mined the reward was 50 Bitcoins and since the last two cuts that happened in the years 2012 and 2016, the reward went down to 12.5 BTC.
Taking into account this whole statistical scenario about production and the time that 21 million Bitcoins will be mined, it is estimated that by 2032 all existing Bitcoins will be mined by 99%; however, as the rate of production will gradually decrease, along with the difficulty of mining, it is speculated that it will not be until 2140 that I know that I will mine the last Bitcoin.
How does this event affect the Cryptocurrency market?
These actions have several drawbacks, which are:
In my previous publications, analyzing the Bitcoin in a fundamental way, I have commented that the whole market is susceptible to the movements that the Bitcoin has, that is, there is a lot of correlation of the altcoins with it, so depending on the movements that the Bitcoin makes, most if not all of them will follow the movement of the Bitcoin, either up or down.
Behavior of the Halving BTC:
Image of insdrcdn.com - Behavior of the BTC halving - sorry that this is in Spanish
Image of TradingView, showing the years 2012 and 2016 when the halving
Image of TradingView, showing the graph of the current price
However, taking this into account, every time the Bitcoin Halving has been carried out, the market's reaction is notorious, both in 2012 and 2016 have been bullish, so the greatest probability is that the market will react favorably to it. To give a little more detail, let's take a look at the following images I'll show, where we'll see how the price has behaved when Halving has taken place.
Conclusions
We are going through very difficult times due to the health crisis caused by Covid-19, this has caused the markets to be affected and in turn the economy itself, so we have to see the evolution of Bitcoin as a response to the current crisis and to show that it can be an asset refuge as is the case with Gold at the moment, in my opinion cryptomonies are the answer to many current economic problems, I think that Bitcoin does work as a safeguard and also as a deflationary asset.
This is my way of analyzing the situation that we may be about to see due to the Halving that is coming, I do it as a market analyst and also as an enthusiast, since the current monetary policies of the governments, printing money without any control, what it causes is a worsening of the economy, that no matter how much they manage to camouflage it at the moment, it will get out of hand for creating so much debt.
Finally, I would like to know in the comments what you think about how Bitcoin will react once the reward is reduced by half, so that we can count not only on my opinion but also on the opinion of many of you who also make life in this great community and thus determine what action to take to safeguard our funds.
I am Co-founder of the @erarium project, in this community we offer training processes in trading, finance and economic management. Consider joining our official Discord by clicking HERE.
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A very interesting post, and I think I would risk saying that it seems obvious to me that the price of BTC will skyrocket once halving occurs, and this is because with the greatest difficulty in obtaining it it will result in a higher price.
Greetings, that's right, I think exactly the same, so, we should all have some Bitcoin stored before that.
Halving has become something I hear regularly and I planned to read about it later, I am glad I found your post, it was enlightening.
Excellent, thank you very much for reading, I try to make these issues very clear to everyone so I can help the community. Greetings.
I have read many things about it, however I think that unfortunately we must wait to see what happens with Halving.
If this is the case, many are the speculations, although personally I do believe that it will rise after such an event, perhaps not as strongly as many expect, however, as you say, we must wait.
As a follower of @followforupvotes this post has been randomly selected and upvoted! Enjoy your upvote and have a great day!
@tipu curate
Upvoted 👌 (Mana: 0/4 - need recharge?)
Dear @lenonmc21
Finally some topic that is not related to C-19 or justin or hive :) Tadam! :) Something more refreshing
I stronly believe that most investors already prices in effect of the famous Halving. It surely will reduce sellin pressure, however halving itself will not bring demand. I personally wouldn't expect miracles (as many people do).
Partly. Currently the biggest economic problem most investors, business owners and house owners are facing is related to credit crunch. Everyone needs FIAT to pay loans, debts, morgages, taxes. We need FIAT to survive once our jobs will be lost. We need FIAT to keep our businesses alive during those difficult times.
So demand for FIAT is huge and as long as current crisis will last - it will most likely continue. At the same time amount of printed new money will flood markets. And in the future I would expect that major problem (once C-19 crisis will be over) to be related to inflation. That will be the time when we will witness huge demand for assets (gold, silver, crypto, land, houses etc).
But will that happen as fast as next month? I hardly doubt so.
Have a great weekend ahead,
Yours, Piotr
You are very right friend @crypto.piotr, I agree, if we can be sure that in a medium to long term this will happen, however, what you say is what is happening right now and I don't think it will happen very soon either.
Thank you very much for that valuable comment, greetings.