Kanalcoin.com – Bitcoin Halving is a big and important agenda for Bitcoin miners around the world. This event plays a big role in Bitcoin exchange rate fluctuations and mining intensity. Let’s get to know what Bitcoin Halving is through the description of this article that we present especially for you.
Don’t allow yourself to simply wonder what the Bitcoin Halving is without knowing how important its positive and negative effects are on crypto investing. These events are part of the basic code that governs the Bitcoin circulation and storage system. So, you could say this event occurs automatically with certain conditions according to the orders that have been planted on the Bitcoin Blockchain.
Bitcoin Halving is a moment of reducing mining rewards to half of the current circulating value. This event occurs every time mining reaches 210,000 blocks. Mining or mining one block has the opportunity to earn a certain number of bitcoins. This number of Bitcoins per 1 mining block is cut to half during the Bitcoin Halving moment.
At the beginning of the launch, mining 1 Bitcoin block was rewarded with a reward of 50 Bitcoin or commonly called 50 BTC. This lasted until November 28, 2012, where the first Halving took place. The 50 BTC figure drops to 25 BTC.
Four years later, on July 9, 2016, the reward value was again slashed to 12.5 BTC. The last halving occurred on May 11, 2020. As of today the mining reward for 1 middle block is at 6.25 BTC.
It is estimated that there will be one more reduction in the value of this reward in 2024. Therefore, in the next three years we will arrive at a reward figure of 3.125 BTC. This number is said to be the last reward number before all the coins stored are scattered.
Bitcoin Halving Effect
When you mine blocks, you can collect 1 BTC reward within 10 minutes. This time is calculated by the availability of really capable hardware and software.
While most people who mine in groups in mining pools will probably get a profit of 0.00000001 BTC for 1 block or depending on the total number of miners in one pool.
If you look at what the Bitcoin Halving is only from one side, you might immediately think that this is a detrimental system agenda. However, did you know that the Halving event has played a role in increasing the exchange rate of this largest cryptocurrency.
Miners certainly find it increasingly difficult to reduce mining rewards. Because then the energy that must be spent to get 1 BTC becomes greater. However, the fact is that Halving has a beneficial impact as well. Although on the one hand the reward is reduced, the Bitcoin exchange price on the market has increased dramatically.
Since its launch in 2009, the price of Bitcoin has steadily and significantly increased. At first Bitcoin was only traded for a few cents. In the first Halving event, the price rose above US$1.
The first halving has not shown a major influence on the price of this cryptocurrency. Then, during 2012 to 2013, there was an increase in prices to touch US $ 1,100. The price of Bitcoin after the first Halving continues to move up and down as if looking for a stable point.
Until 2015, from the price of US $ 152, the price of Bitcoin continued to increase slowly until the second Halving. The price increase after the Halving will usually decrease and increase at a stable point in line with the high and low demand and various digital market conditions.
The second halving in 2016 proved to be the point of success of the Halving system as a price control strategy. By this time, investors and miners from all over the world had understood how the Bitcoin system operated.
They were actually waiting for the arrival of Halving day. The change in reward from 25 BTC to 12.5 BTC is proven to increase the Bitcoin exchange price. One year after the second Halving, Bitcoin’s value reached US$19,700. Yes, roughly 1 Bitcoin at that time was enough to exchange for 1 house type 36.
The third halving that occurred last year was threatened badly because of the effects of the pandemic. Two months before Halving day, on March 8-12, 2020, the price of Bitcoin had fallen by 30% as a result of the global economic downturn. From the figure of US $ 8,901 at that time the exchange rate became US $ 6,206.
The decline did not last long. By October 2020, the Bitcoin price had reached $13,200. This increase is also thought to be caused by the global economy during the pandemic. Although it had decreased, gradually investors began to feel that crypto investments were better than non-crypto investments.
As is known, during the pandemic all aspects of the economy experienced a setback. Price changes are very lame. Crypto investment is also becoming increasingly popular because its value fluctuations are relatively more stable than non-digital investments. This has fueled an increasing demand for cryptocurrencies, particularly Bitcoin.
When demand increases, the price of Bitcoin also goes up. Stability and scalability exceeds the most expensive metal in the investment world, namely gold. Even the world’s billionaire, Elon Musk has also expressed interest in this crypto investment. As of early July 2021, the Bitcoin price was at US$33,005.40.
Bitcoin Halving Scheme
You have to be familiar with the Halving scheme to really understand what Bitcoin Halving is. Reducing the value of rewards that occur in fact is not as simple as we imagine.
Halving has been cited as a brilliant way to control the inflation of Bitcoin as a high value and stable currency. The selection of a time span of four years does not happen as long as you remember the commands in the basic Bitcoin code.
First, you must remember that these currencies are limited in number. Only 21 million BTC will be in total circulation worldwide. This amount will quickly run out if circulated in constant quantities.
Therefore there must be a strategy that controls the rate of supply. When the velocity of money circulation is high, its value will experience a surplus. This surplus will cause the value of money to decrease. This is where reward cuts come into play to reduce the rate of bidding.
In that situation, the value of money will rise. Investors and miners will enjoy rising prices for some time. However, it will move downwards to a more stable number after a while as this decrease in reward will also “prune” the number of small miners.
That is, the number of requests will decrease so that the price will move down slowly until the number of available coins and miners find their own balance.
Well, this is where the Bitcoin Halving system becomes a brilliant currency control strategy. The Bitcoin Halving scheme works not only to increase the exchange rate of the currency, but also to bring the market price to a stable point between supply and demand.
Here’s a simple schematic so you get a more complete picture of what the Bitcoin Halving is:
Reward Reduction ➡ Half Inflation ➡ Lower Bitcoin availability ➡ Higher demand ➡ Higher price ➡ Miner incentives are still available in spite of smaller rewards as bitcoin value increases.
In other words, the loss incurred by reducing the reward will be covered by the increase in the value of the currency price.
How, already understand what is Bitcoin Halving? This Bitcoin Halving scheme also accommodates the possibility if the Bitcoin price does not rise. If the reward has been halved and the bitcoin value has not increased, the mining difficulty will decrease as the number of miners decreases.
Knowing what the Bitcoin Halving is also proves useful for determining the exact timing of buying and selling crypto assets. As described above, the pre- and post-Bitcoin Halving is a moment where the price of Bitcoin increases drastically.
This means that it is suitable for selling assets and making a profit. But you still need to do more careful calculations for each decision in this crypto investment game.
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Author: Muhammad Zaki Fajrul Haq
Follow me at @mzfajrulhaq (Instagram) or @ZakiFajrul (Twitter).