Are you new to cryptocurrency and wanting to make that eagerly awaited jump into investing?
Interested in learning more about whether this is the right time to take the next step?
Bitcoin Halving 2020.
Think about it this way…
They say no time is better than the present and you are one of the lucky ones reading this now which could aid in you becoming very profitable with just a bit of patience and knowledge on cryptocurrencies and bitcoin.
Now, you may have come across the term bitcoin ‘halving’ or potentially want to understand how the supply of bitcoin works?
Bitcoin halving takes place every 4 years and with that, the supply of bitcoin decreases which usually tends to have a correlating factor on price and value.
But before we go into more detail about how this can benefit you, let’s just take a quick walk down memory lane to see what exactly we mean by this and where we are currently with this emerging technology.
A Small Bit Of History About Bitcoin
Bitcoin emerged after the financial crisis in 2008 and was created by an anonymous entity or group of individuals by the name of Satoshi Nakamoto.
It was essentially the first cryptocurrency created as a form of digital currency, which can be used as payment to send between 2 people globally.
So let’s dissect what a cryptocurrency is, what the uses are and why you would want to own some.
And to do that, well, we would have to dissect it into its simplest form:
Crypto – Concealed/Hidden/Secret (Usually placed before a word to refer to something with hidden principles)
Currency – Money/Acceptance/Commodity (An accepted form of money)
Now you may be wondering, how are payments sent and received and who records this?
Well, all of these transactions are stored on the bitcoin blockchain, which is fundamentally a decentralized database.
With our current monetary system; in order for us to send payments to anyone we need a 3rd party/bank/financial payment provider to be the middleman to authorize this payment right?
However, with blockchain technology you DON’T need the middleman!
You heard it right…
The decentralized database can record every transaction that takes place on the network, which means it greatly increases transparency and efficiency whilst removing those middleman fees.
What are the benefits for you sending/receiving a bitcoin payment?
Faster payments – Currently sending a payment through the bank could take between 3-5days. Sending a payment on the bitcoin blockchain can take around 1 hour.
Quite a big difference…
Payments are anonymous – You are given public keys which means confidential information such as your address and name are not required.
Decentralized System– No middleman required so this means you are dealing directly peer to peer.
So if you’re pondering on whether you should invest in bitcoin we’re going to explain why this may actually be a great time.
Now, cryptocurrencies work via 3 different supply methods.
Circulating Supply – The current amount circulating and available for trade on the market (This includes all exchanges).
Total supply – All coins in existence including all sold and those circulating (This would usually be larger than the circulating supply)
Maximum supply – The maximum supply that will ever be generated
This will help you in understanding how the current supply of bitcoin has an effect on the price and how bitcoin halving comes into play.
What Is Bitcoin Halving?
When Bitcoin was created, Satoshi Nakamoto put a rule in place where miners were rewarded with 50 bitcoins per block. This reward would halve every 4 years or roughly after 210,000 block transactions.
1 Block reward = 50 BTC
So, in turn, this would create a halving event.
Now there have been two halving’s since 2008 (see table below)
There’s even a site, which has a countdown to the next bitcoin halving!
Check it out and keep a close eye;
So, why the change? Wouldn’t it make sense to just keep the reward the same for miners?
Well, this all boils down to supply and demand. If the reward stays the same for miners verifying the blocks then the value of bitcoin will never really need to increase.
In reducing the reward for mining bitcoin, this would then slow down the distribution of bitcoins through halving which also manages inflation.
As the mining difficulty increases, the reward value decreases which means it’s going to be very hard to gain 1 whole bitcoin due to its high value in the future so owning some now may just the right time!
Let’s compare this to the current fiat system, which we have in place today.
Banks currently are able to print substantial amounts of currencies at any rate, which is a huge issue as the value of the currency drops when this happens.
So what effect will this have on price?
Well a few months after the first bitcoin halving event in 2012, the bitcoin price rallied from around $30 to reach an all-time high of $1000.
In 2016 the second bitcoin halving triggered the biggest Bull Run the cryptocurrency space has ever witnessed in which the price rallied from around $500 to over $19,000.
The metrics designed for bitcoin makes this cryptocurrency truly valuable in the long-term as there will only ever be 21 Million Bitcoin that will ever be created.
So can you imagine what that last bitcoin to be mined is going to be worth in the years to come?
Now we’re not saying anything is guaranteed here.
The price of bitcoin did not immediately surge in price during the halving but gradually over the months saw substantial growth.
I mean we all wish it was that easy to call the next move but the cryptocurrency market can be very volatile which is why it is extremely imperative as a new investor that you invest only what you can afford to lose.
There have been very significant price corrections since the last 2 bitcoin halving periods but with it being such an early emerging technology and with the way we can send payments, it’s hard to look past the fact we could see another rally in 2020.