The Bitcoin Halving is Today: Here’s What You Need to Know
Today is the day folks-after months and months of anticipation, Bitcoin halving has arrived: today at 20:30 GMT, Bitcoin miners will receive half the reward for their work adding transactions to the blockchain.
What does this mean to the Bitcoin network? There are many predictions about the effects of the halving, but there are several common narratives among cryptocurrency analysts.
1: Experts believe that Bitcoin will rise after the halving-eventually
The price of Bitcoin is currently on the decline. It peaked at $9700 on Sunday May 10th. At press time, Monday May 11th, that number had dropped to $8,675. In the past 24 hours, it has fallen as low as $8.466.
The most common belief in cryptocurrency circles regarding halving events, is that they are great to the Bitcoin price: sooner or later, the halving will cause Bitcoin prices to explode.
This belief is based on the fact that halving the mining reward contributes to a greater scarcity of BTC, as more users use the network. At the moment (pre-halving), 1800 BTC is produced per day by miners. Post-halving, this number will drop to 900 BTC per daily.
Jose Llisterri (co-founder of Interdax cryptocurrency derivatives exchange) explained to Finance Magnates late last week that a decrease in Bitcoin supply leads to a decrease in sell pressure. “[This] adds up over the time and acts like an upward force on Bitcoin,” Llisterri said.
How long would this price rise take to become Bitcoin’s actual price? Llisterri stated that in the past, BTC reached new highs 12 months after its first halving in 2012. And 18 months after its second halving.
A post-halving price increase could take longer this time: “If we have progressively longer bitcoin cycles, we could see an additional high 18-24 months following May. This means that Bitcoin could reach a new all time high between October 2021, 2022, and May 2022.”
There has been much discussion about how the COVID-19 pandemic will impact the market. Analysts believe that QE and other government stimulus efforts will be good for Bitcoin. Others believe the pandemic may have a longer-term dampening effect to the price of BTC.
#2: Bitcoin miners of small and medium size could be in serious trouble
Although it is possible for Bitcoin’s long-term price to rise by halvings, miners are likely to suffer a significant loss as a result.
If the halving happens, mining operations may become more profitable again. However, it could be a while before that happens.
Therefore, large mining pools with state-of-the-art equipment and lots of cash on hand aren’t necessarily the ones who should be concerned: instead, it’s the small- and medium-sized Bitcoin mining operations-operations that may also be relying on outdated equipment-that may eventually be forced to shut down.
Nathan Nichols is a managing partner of Imperium Investments. He stated last week to Finance Magnates that he believes the upcoming halving will “harm the majority of miners.”
These miners might have to sell their equipment and Bitcoins as the cost of producing BTC keeps rising. Nichols stated that this is because power expenses must be paid with fiat.
Bitcoin’s hashrate, the amount of computing power required to power the network, was at 120.635million TeraHash/second (TH/s), at press time. This is just below its peak of 123.2m TH/s last week. This could indicate that miners are increasing their numbers or that those already on the network are working hard to keep up with the halving. Many analysts believe that the hash rate is the reason the price moves.
#3: The halving of Bitcoin and Cryptocurrencies is “a tremendous marketing opportunity.”
No matter what happens, BlockFi cofounder and chief executive Zac Pringle made an important point last week about the halving of prices or changes in the mining sector. He said that the halving “creates tremendous marketing opportunities for the space.”
He said that “the halving doesn’t matter that much for fundamentals” but “[…] everybody’s going to hear about Bitcoin. It will be everywhere. It is already all over the media.
Indeed, the halving of Bitcoin seems to have increased attention: Google Analytics data shows that searches for “Bitcoin”, as well as other words, have increased significantly in the past few weeks.
China Central Television, China’s state-owned television network, also gave Bitcoin positive press.
This article, which talked about the “skyrocketing [price] Bitcoin” before the halving was particularly surprising considering China’s past tense relationship to Bitcoin and other cryptocurrencies. He also pointed out that Paul Tudor Jones, a legendary hedge fund manager, had previously proclaimed the benefits of cryptocurrency to his investors.