Right now, Bitcoin Halving is a big topic in the cryptocurrency world. Again and again, it is called in connection with the price development of Bitcoins. But what exactly is this?
Bitcoin Halving explained
In Bitcoin, halving occurs when block rewards for mining are split in half. The Bitcoin halving occurs at periodic intervals based on the Bitcoin etiquette. The term Bitcoin Halving refers to the block rewards, which the miners get if they find a valid block.
In the case of Bitcoin, the Bitcoin halving takes place every 4 years, to be exact after every 210,000 blocks. Since the average block time in Bitcoin is 10 minutes, it comes to 2,100,000 minutes, which equates to exactly 4 years. The last Halving took place at block number 420,000, which was gained on July 9, 2016. Block # 419,999 still had a block reward of 25 bitcoin, while block # 420,000 gave the miner only 12.5 bitcoins.
One of the most notable characteristics of bitcoin is that there is a limit on the quantity of coins that will ever be in flow. The production of new bitcoins can be prophesied precisely and is clear to everyone. This is distinct from the banking system, where fundamental banks can print infinite money. To know what is Bitcoin Halving is, you must first know the fundamentals of Bitcoin mining. In brief, new Bitcoins develop into the cryptocurrency world as a prize for miners whenever they mine a block.
What effects does Bitcoin Halving have on the price?
Market practices say that supply and demand manage the market. If demand remains the same, an increase in supply apparently lowers the price. This suggests that if demand remains steady, the price would have to decrease more slowly after halving (supply growth will be halved).
However, varying demand motivated by emotions and the psychology of market professionals in the crypto market is by far the aggressive market power. There is a common feeling that lowering the supply raises the price. The so-called stock-to-flow ratio appears to leave no doubt that there is a bond between the halving of the block reward and the rising price (although the growth of cryptocurrencies can also be attributed to the growing awareness level). This view is somewhat unilaterally expressed in the media, which of course raises demand, as everyone wants to benefit from the probably safe price increase. The prophecy fills itself.
An important symbol for the Bitcoin Halving will be the expected price evolution of Litecoin. If the cryptocurrency of the Halving continues to rise, it will fuel the Halving hype surrounding Bitcoin. If that is not the case and more likely to lose value, it could upset the collective belief in the stock-to-flow theory. Because if one governs the crypto market, then it is the emotions and collective psychology of market participants, not market theories.
Bitcoin investors strictly follow Bitcoin’s halving periods, as every halving decreases the supply of newly-minted BTC enrolling the market, making it rarer. In theory, this should have a profitable influence on the value of BTC, and Bitcoin’s price tale gives importance to this hypothesis, although you have to remember that you are bargaining with a sample size of 2. In any event, it is challenging to create a situation where a Bitcoin halving operates as a negative impact on the value of BTC.
When is the next Bitcoin Halving?
At block # 630,000, Bitcoin’s next half-block rate is 6.25 bitcoins per block. By that time, 18,375,000 bitcoins will be mined and inflation will fall to ~ 1.79/year. At the moment, halving is expected to occur on May 19, 2020. Since the 10 minute block time is a blind variable that is fixed via the hashrate, precise forecasts are not possible. The temporary prediction becomes more accurate the closer you get to block no. 630,000. You can find a countdown -> here .
In Litecoin a Halving is in the month of August. This is the second half of the block reward on Litecoin, which is 12.5 LTC. Litecoin has a four times higher inflation than Bitcoin because the block time is 2.5 minutes instead of 10 min.
Disclaimer: This information should not be interpreted as an endorsement of any cryptocurrency. It is not a recommendation to trade. The crypto market is full of surprises and overhyped assets. Do your research before buying anything. Do not invest more than you can afford to lose.
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