Bitcoin Halving; Why Bitcoin Halving Analogy a Good Venture for Investors
Bitcoin has been in existence for quite some time now. And in the last couple of years, it has seen a booming rise in popularity and value. But what is Bitcoin? Well, it's an online currency that can be used to do things like buy goods or services, invest money into other currencies or just trade with your friends. You can think of Bitcoin as digital cash - but without any physical form!
The rate at which new bitcoins are generated gets cut in half every four years (the "halving"), and this event will happen for the second time ever on July 11th, when there will only be 12 million bitcoins left to mine after the halving happens. This means that if you want to get involved with bitcoin trading, you should understand Bitcoin halving and Bitcoin mining.
What is Bitcoin Halving?
Bitcoin halving is a portion of Bitcoins that comes into existence when miners mine Bitcoin blocks. When the mining process starts, 12.5 Bitcoins come into existence with every mined block, but after some time, when they will start to circulate in the market and users will use them, then, later on, a number of Bitcoins will be available for miners with the same effort will be only 6.25 Bitcoins. This is what we call Bitcoin halving; the first halving event took place in 2012, and this year, May will be the second one.
Why Bitcoin Halving Is a Good Venture for Investors?
Investing in any project or company yields profit to the extent of business performance, but what if someone tells you that there is a fixed amount of profit and it will not vary no matter how much business you do? Your return on investment becomes unchangeable. The same is the case with bitcoin mining; mining difficulty will keep increasing no matter if the previous block was mined yesterday or one hundred years ago. So buying this particular asset can yield benefit to the individual, or there can be other reasons to invest in it. Bitcoin mining refers to the inclusion of transaction records to the public ledger of Bitcoin of past transactions.
Every four years or so, the number of bitcoins released compared to the ones available in the previous cycle halves, as does the reward to miners for discovering new blocks. Consequently, the number of bitcoins in circulation halves every four years. Currently, there are roughly [blockchain.info charts 15.7 million bitcoins in circulation) The first halving occurred in November 2012, which cut the reward for discovering new blocks from 50 bitcoins to 25.
What Will Be the Impact of Bitcoin Halving?
Bitcoin mining is a competitive endeavor. An "arms race" has developed to create more powerful mining hardware, which you can read more about in our previous article on the topic. When the number of bitcoins released per new block drops by 50 percent, it will become less profitable or even unprofitable to mine. This is because the reward for mining will fall from 25 bitcoins to 12.5. The only way to avoid the reduced revenue would be if bitcoin prices rose enough to offset it. Some believe that this will happen or already has happened, which is why they are not worried about the upcoming halving.
On a positive note for miners, there is a chance that prices could rise sharply as well. If you don't have any mining rigs at your disposal, you can always invest in a mining contract. While the hash rate will be lower, this could still turn out to be a profitable option compared to purchasing bitcoin directly.
The next block halving took place on July 9th, 2016, and reduced the number of bitcoins awarded for solving a block. This was programmed into the system and cannot be undone. It also reduced the rate at which new bitcoins could be released from 25 BTC every 10minutes.
The last halving took place in 2012, and it led to a surge in prices, resulting in a lot of profit for many miners back then. In theory, the same thing could happen again in 2016. This is unlikely, according to some experts who think that the price will not surge that much. The reward drop may lead to an exodus of miners, resulting in even less hashing power than currently.
Theoretically, it should take about 4years for half of all bitcoins to be mined. Since there is no cap on the number of bitcoins that can be created, the last coins might take a lot longer to be mined.
The price of Bitcoin has been relatively stable over the last couple of months, hovering around the $450 mark on Bitstamp. The news about New York's bitcoin hearings led to a small price rally, but it's not clear whether this will have any long-term effect on the hash rate or price.
The drop in the reward will bring the inflation of bitcoins from 3,63% down to 2%. Since about four years remain to mine all bitcoins, this means that inflation over the next four years might approach 0%. Inflation describes how fast a currency loses its value when it is not backed by something else of the same kind.
Pros of Bitcoin Halving
1. The network will be more stable because the cost of running the hash rate to mine will decrease. This might result in less price volatility.
2. There will be an increase in purchasing power because bitcoin holders can buy more with their bitcoins.
3. With higher demand and a lower supply, there is a possible increase in the price of Bitcoins.
4. As there will be fewer bitcoin miners, prices can decrease because there is no supply and demand for each individual person that holds one coin.
5. More people might start mining bitcoin if it becomes more profitable to do so because the difficulty level will have enough time to adjust to any increases or decreases in hash rate.
6. More people might buy mining equipment as it becomes more profitable to do so, which will again create an increase in the price of bitcoin due to a decrease in supply and demand.
Disadvantages of Bitcoin Halving
1. Market price of bitcoin will be more unstable, and it may cause a loss in your investment
2. The demand and supply control and stability of the market is replaced by the emission rate, which makes this system bad for investors
3. Reduced velocity of money: Cuts into how many times bitcoins can change hands. 4. Possible reduced business volume: It is possible businesses and users of the bitcoin network will be reduced in number, which would, in turn, reduce your investment
5. Too many miners may create a flood of the transaction on the blockchain, making it difficult to determine how long transactions will take before they are confirmed.
Bitcoin halving is a significant event for the cryptocurrency market, and it will have an impact on bitcoin's value. If you want to get into the transaction before these changes happen, visit our site today. We'll show you how to purchase bitcoin with your credit card or debit card!