Have you heard about the Bitcoin Halvening or Halving? No! Where have you been? Under a rock! Bitcoin mining isn’t that type of mining, you won’t find it under rocks and soon there will be less of it to be found/mined. Yep that’s right, the ‘reward’ for Bitcoin mining ie Bitcoin is about to undergo a halving event that means there will be half the amount of Bitcoin available for the same amount of ‘work’.
It’s literally days away and this will be my first one so I’m quite excited to see what happens to my own wee Bitcoin stash – will it go up, will it go down, phew – I’m more Satoshi Small Fry than Bitcoin Whale but I’m still on the rollercoaster and cannae wait to see what goes on!
Bitcoin Halvening is what now?
Unless you really have been under a rock you must have at least heard of Bitcoin by now, you may be aware that Bitcoin is a decentralised, peer to peer crypto currency that is mined by specialist mining equipment called an ASIC (Application-Specific Integrated Circuit) miner but you may not know how it all works, you can read about it here. In a nutshell, the ASIC miners are powerful, juice hungry computers that people use to race against each other to solve an extremely complex mathematical problem and the first that gets the correct result gets to add that block of data to the Bitcoin Blockchain – a process called ‘proof of work’ the reward for which is currently 12.5 Bitcoins.
This process happens roughly every 10 mins, according to a mathematical protocol that has been put into Bitcoin’s programming. The same protocol also halves the reward every 210,000 blocks which is 4 years or so, meaning there is still a new block produced every 10 mins but the reward will go down to 6.25 Bitcoins. For some miners, particularly those running solo operations, this will prove unprofitable at least in the short term because they have costs associated with Bitcoin mining including huge power bills, mining equipment, cooling equipment etc which might not be covered by the reduced return – a lot of miners immediately sell their Bitcoin ‘reward’ to cover their costs.
What’s Going To Happen?
Some solo miners might have to temporarily shut down their operations, especially those in countries where power is expensive. Bitcoin may go down in value prior to the halvening, this has happened historically but then it has gone back up a few months after so hopefully that will be the case this time too. Speculation is rife in the ‘crypto space’ with experts and enthusiasts falling over themselves with predictions, previous info that proves Bitcoin is going this way or that.
The Altcoin shills are out in force on Twitter each claiming their coin or token is the next big thing – I’m still betting on Scotcoin for the win – check out my latest article about Scotcoin V3* featuring my first ever podcast interview with CEO Temple Melville (thank you so much Caroline Wylie for making that happen) – going on the evidence of my wallet balance and ‘proof of work’ shown by The Scotcoin Project CIC that has ensured that Scotcoin continues to rise in value whilst effecting real change in the community.
The Coronavirus Effect
I trade Bitcoin and other Altcoins on eToro (an online trading platform I’ll be reviewing soon) where the crypto markets are open 24/7. There you can watch Bitcoin’s rollercoaster play out in real time and read the opinions of other traders as they speculate wildly on the Newsfeed about Bitcoin’s movements sometimes hourly. Charts abound showing previous ATH’s and ATL’s with graphs ‘proving’ what’s going to happen based on what has gone before which even this noob knows isn’t the most reliable of strategies but if you don’t know anything about anything could have you fooled.
As you are probably aware the stock market crashed in these past few weeks (beginning 20 February 2020) mainly due to what I’m calling the Coronavirus Effect – unemployment has risen to staggering levels, the world is on Lockdown, the death toll and infection rate continues to rise here in the UK and the rest of the world (except Antarctica), the world’s economy has gone into free fall, governments globally are printing money daily (known as quantitative easing) $2 Trillion in US alone, bailing out failing businesses, fortunes are being made and lost – Virgin Australia (Richard Branson’s airline) has gone into administration, Warren Buffet has jettisoned ALL his airline stock, Oil prices turned negative for the first time in history and Jeff Bezos, CEO of Amazon has had 26% higher sales than this time last year (net sales 75.4 billion in the 1st quarter that’s a mind boggling 33 mil an hour!)
Bitcoin’s Raison D’etre
Of course the big difference between this stock market crash and others (including Sept 29 2008 which previously saw the biggest point drop in history) is Bitcoin. Bitcoin’s raison d’etre – the 2008 financial crisis, after which it was created as a safe haven and store of value – taught the financial world some hard lessons number one being that the stock market is not recession proof. Bitcoin was created in response to the need for a currency that was inflation proof and could be controlled by people themselves without having to rely on companies, governments or banks.
Which brings us back to ……
Bitcoin halvening/halving whatever you choose to call it is the opposite of ‘quantitative easing’ in that cutting the supply of Bitcoin will ensure the scarcity of it at the same time as preventing extreme price inflation. What that does to the price remains to be seen, however. Most are expecting the price to go up in line with the law of supply and demand but there are naysayers out there too and still others whose opinion seems to fluctuate in line with Bitcoin. Two articles a month apart by the same author, Sam Bourgi, alternately labelled Bitcoin no safe haven and the best performing asset of 2020 at CCN.
When Bitcoin was first created the reward for mining was 50 Bitcoin, the first halving in November 2012 saw that amount reduced to 25 Bitcoin and an increase in price from $11 to $1,000 followed about a year later. The second halving took place in July 2016 followed a year later by an increase in price from $700 to $20,000 it’s then ATH. It has been suggested that these results are evidence that we can expect more of the same but equally it has been implied that the halving is already priced in, that miners prepare for it at least 12 months in advance and Bitcoin could crash – time will tell.
So what do YOU think is going to happen? Please comment below with your thoughts, questions and experiences, I’d love to hear from you.
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