Bitcoin Halving Reduces Mining Rewards for Third Time in Brief History
The most anticipated event for cryptocurrency in 2020 has come to pass. Bitcoin’s third Halving took place at 03:23 EST with the mining of block 630,000, effectively reducing the block rewards from 12.5 to 6.25 BTC per new block for the third time in its history.
The first block mined for 6.25-bitcoin was mined and relayed by Antpool, the fourth largest mining pool by computer power.
In previous Halvings, Bitcoin's block rewards went down to 25 from 50 bitcoin per block in November 2012 and further decreased to 12.5 units in July 2016.
Block rewards refer to the amount of Bitcoin received by miners after they successfully validate a new block. The halving occurs once every 210,000 blocks which takes approximately four years.
Bitcoin’s supply is limited to 21 million coins and Halving events are expected to occur until approximately the year 2140 when all the Bitcoin will be mined. By this time the block reward should reach one satoshi - the smallest possible unit of a Bitcoin. According to Blockchain.com there are currently 18.37M BTC in circulation.
As the halving approached the Bitcoin network saw a significant increase in fees. The average BTC transaction hit a peak of $3.19 on May 8, an increase of over 300% from the average fee of $0.62 on April 26. With the Halving only a few hours in our rearview, the current average fee for the Bitcoin network is $1.92 according to Blockchain.com.
Prior to the third Bitcoin Halving, we asked some experts for their predictions and below are their responses:
“Sentiment before the Halving seems to be more positive than in the previous two due to the increased institutional and smart money in the crypto market, the market is likely to become increasingly bullish of Bitcoin’s fundamental properties, namely its scarceity. You can view the Halving as a schelling point for helping investors understand Bitcoin’s supply cap and, despite there being no fundamental changes in the market dynamics - hashrates haven’t fallen signalling miners aren’t leaving the market - it has been a driver of increasingly positive sentiment of Bitcoin’s long term value proposition and the “Digital Gold” narrative." - Lanre Jonathan Ige, Researcher at 21Shares and Amun Token
“Bitcoin reached a high of 10,066 on Friday and has dropped into the halving, currently trading at 8,669. In our view, and given that the 2020 halving is taking place in a more efficient market than at previous halving's (2012 and 2016), the market discounted the lower supply into the weekend and participants are now taking profits. In effect, we are seeing buy the rumour, sell the fact at work. Once the market has settled, the cryptocurrency will once again be subject to demand forces as opposed to only being based on the supply contraction.” - Russell Shor, Senior Market Specialist at FXCM.
“Predicting the price of Bitcoin post its halving isn't going to be easy. If I have to make a guess is that I would expect it to sell off. It depends on the momentum of Bitcoin's price heading into halving. If the price continues to stay firm above 9,000, I would expect it to see a sell off albeit a less horrifying one compared to March 12. BTC could sell off before the halving instead. Nevertheless, my view is that Bitcoin should retrace some of its recent gains. Firstly, there have been quite a few funds, traders and market-makers who have positioned long. Secondly, miners selling into halving as the smaller players cant stay profitable.” - Eugene Ng, Matrixport
What Happens Now to Bitcoin's Price?
Bitcoin remains a controversial asset with most people either believing it to be valueless or set to be worth $1 million per coin. Previous Halving's have historically ushered in bull runs for the Bitcoin price with the last halving culminating in the all time high of $20,000 per coin.
“If history is any indication of the future, I am pretty bullish about the next halving.” Ray Youssef, CEO of Paxful said, “Usually, the interest around Bitcoin goes up due to halving because Bitcoin is only getting more scarce. We’ve had astronomical increases in prices during the last two halvings. There are also several indications for that. Google Trends suggest that the interest around bitcoin halving is at all-time high already eclipsing the phenomenon last term. Various news pieces also suggest that there has been a sharp spike in the number of Bitcoin addresses holding at least 1 BTC and at least 0.1 BTC as evidence of accumulation by retail investors ahead of halving.”
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