With the next Bitcoin halving expected in May, speculation about the currency has been rife. The two times this has happened before resulted in a surge in the Bitcoin price. Could this year’s halving follow a similar pattern?
Before you start to dream about all the flights that your newfound Bitcoin wealth will buy you at Cheap Air, it’s best to sit back for a moment.
Let’s look at what the halving is. Then we’ll examine whether or not this one is following the pattern of its predecessors.
What Is the Halving?
Bitcoin’s founder, Santoshi Nakamoto, created a finite number of coins. By creating an endless supply of coins, you’re devaluing the currency and leaving room for inflation to run rampant. Nakamoto didn’t want Bitcoin to undergo that route.
So, along with issuing a limited number of coins, Nakamoto also set the system to halve the coins at certain levels. This halving occurs around about every four years.
Great, but what is the halving?
The halving means that the number of coins miners earn for mining a block will be halved. So, if they were earning 25 bitcoins per block, they’d earn 12.5 after the halving.
Isn’t That a Bad Thing?
For the miners, it can be. They’re earning less money for doing the same job. That said, the theory is that the fewer coins there are in circulation, the higher the value. According to Nakamoto’s theory, the losses from diminished rewards would be offset against the gains in value.
In other words, miners will earn fewer coins, but each coin will be worth more.
Is There a Bitcoin Boom on the Horizon?
Over the past few months, we’ve seen Bitcoin and other cryptocurrencies becoming popular again. The currency crept up from $8,350 in September to $9,675 in February, so it does look as though the halving is having some effect.
That said, this halving’s increase in price has been slow and not nearly as dramatic as it was the first two times. It would seem as though the usual big investors have largely ignored this halving. If they hadn’t, we’d see the price move a lot more steeply.
So, is Bitcoin booming again? We’d say that it’s on an upward swing. Is it going to hit the $20,000 mark again? That’s not likely.