The so-called ' bitcoin halving ' is expected to take place in less than two weeks, an important event for miners of this cryptocurrency that occurs more or less every four years. From then on, the number of bitcoins mined approximately every 10 minutes will be reduced by half.
It is an intrinsic event of the design of the supply and demand of bitcoin that causes that supply to decrease. Since there are fewer bitcoins produced in the same time unit, each one is worth more. That is the theory at least, and that, together with the FOMO effect ('Fear Of Missing Out,') has caused a new growth in the value of each bitcoin. The same happened in 2012 and 2016.
What is Bitcoin halving?
Bitcoin miners compete to validate the next block of transactions on the bitcoin network. For this, they must solve a complex mathematical problem that is computed in powerful mining machines specifically designed for this purpose that, by the way, consume a lot of energy.
Whoever manages to validate those blocks gets a reward in the form of bitcoins, but when Satoshi Nakamoto designed this cryptocurrency, he did it with a remarkable peculiarity in that production: every four years the so-called 'bitcoin halving' would be produced with which the rhythms of production.
When one of these 'bitcoin halving' is produced, the rate of production is cut in half: miners who mine bitcoin earn fewer rewards, something that affects the entire bitcoin value chain. The basic principle is similar to that of gold: they are finite goods that are increasingly difficult to obtain.
These 'bitcoin halving' have already occurred twice in the past. Before the first, in 2012, the block reward was 50 bitcoins. In 2012 that reward was reduced to 25 bitcoins, and in 2016 it was decreased again to 12.5 bitcoins. Starting in mid-May, that reward will be reduced to 6.25 bitcoins per block.
If everything goes as before, bitcoin will hit all-time highs again.
As About Aluri, an analyst in this segment pointed out; these events have caused similar situations in recent years: the value of bitcoin has risen significantly in the following months and then fell (not as much as it had grown) before it returns to produce that bitcoin halving.
Aluri himself analyzes the previous events of this reduction in production rates, and according to him, "if history tells us anything, it is that [with this new bitcoin halving] prices could once again reach all-time highs, although those highs could take time to arrive. "
Bitcoin halving is expected to take effect between May 12-13, 2020, but its impact, if it follows the pattern of previous events, won't be visible until months later. Aluri's analysis - and he is far from the only one to reach that conclusion - is detailed:
2012 Bitcoin Halving: The all-time high before that event had been $ 30, but a 93% correction occurred that brought its price down to $ 2.01 378 days before bitcoin halving. When the event happened on November 26, 2012, a bitcoin was worth $ 11.50. Four and a half months later, the historical maximum of 270 dollars was reached: from the minimum to the maximum, the value of bitcoin grew by 13,304%. Amazing.
Bitcoin Halving of 2016: of the nearly $ 1,100 that a bitcoin was worth in late 2013, it went to a value of $ 164 in January 2015 (although the Mt. Gox debacle or events such as the closure of Silk Road influenced in those falls). On July 11, 2016, when the second bitcoin halving was produced, one bitcoin was at $ 658. After just over seventeen months later (524 days), bitcoin reached its all-time high of $ 20,074. The increase from the minimum to the maximum was again spectacular, 12,140%.
It is all speculation, of course, and some affirm that the price of bitcoin will not suffer the increases it experienced after the past events of halving production rates.
Many others see a pattern in this type of event, and that has been coupled with that fear of missing the opportunity to invest. The result has been detailed: many investors have decided to bet on bitcoin, which has generated an avalanche of purchase operations and the rise in prices.
That confidence that the price will end up rising will probably make us go back to another crazy succession in the price changes of this cryptocurrency and, by extension, many other cryptocurrencies that "catch" from those rises, something that is being seen in these moments. They all go up, although most do so at lower rates than bitcoin.
In the last 24 hours, that price has risen 18%, and the recovery is even more remarkable when we consider that even the coronavirus impacted the demand for these cryptocurrencies, which fell to just over $ 5,020 according to CoinMarketCap.
Currently, a bitcoin is trading at $ 9,343.85. Now, of course, it remains to be seen what will happen in the coming days, but above all, it will be interesting to see if those spectacular increases in the past are repeated once again in the coming months.
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