What to Expect From the Next Bitcoin (BTC) Halving in 2020?
As the next Bitcoin halving approaches, many wonder what to expect and how the reduction in reward will impact the cryptocurrency's price.
Halving is the process of reducing blockchain rewards on the Bitcoin blockchain by 50%. The next Bitcoin halving is two years away. The reward for the miners successfully mining Bitcoin will drop from 12.5 to 6.25 BTC per block in May 2020.
The question on everyone’s lips is what effect the reduction in block reward will have on the price of the leading cryptocurrency?
A look at Bitcoin’s halving history
Bitcoin is still in its first decade of creation. To properly look at its price analysis, Bitcoin’s historical patterns and trends usually help. Since Bitcoin was created in 2008, there have been two halvings in 2012 and 2016, respectively.
Bitcoin Halving Dates and Reward Change
- 28/11/2012: 50 BTC ↓ 25 BTC
- 08/07/2016: 25 BTC ↓ 12.5 BTC
- 11/04/2020: 12.5 BTC ↓ 6.25 BTC (estimated date)
The halving of block reward takes place once in four years or after 210,000 blocks have been mined.
A look at Bitcoin’s chart shows that both halvings have been followed by significant bull runs. However, it is uncertain if the price rallies occurred as a consequence of the block reward reduction.
In November 2013, the Bitcoin price rose to $1,000. This was the highest price recorded by the coin back then and it occurred a year after halving.
Also, a year after 2016 halving, Bitcoin reached another all-time high of $19,500 in mid-December 2017.
Halving and effect on Bitcoin price
From the above-explained scenarios, the pattern shows that Bitcoin price rises a year after halving. When it comes to the crypto market though, history doesn’t paint the whole picture.
An example of this was the much anticipated Consensus rally which didn’t happen this year even after analysts and industry experts made predictions towards that.
If there is any link between halving and price, then it might be in halving’s effects on hashrate and stability. In other words, halving doesn’t affect prices that much, but rather it affects miners.
A reduction in the block reward means the revenue generated by miners decrease, especially if the difficulty encountered during mining remains the same.
There are lots of factors dependent on the Bitcoin price over the next 20 months or so leading up to the halving. Transaction volume on the Bitcoin network would also play a big role in price determination.
In addition to their mining rewards, miners also earn fees for facilitating transactions. If Bitcoin prices rise high enough to offset whatever the halving might cause in revenue drop, then the odds are that hashrate will not change significantly.
Halving and its effect on hashrate
While talking about the possible effect of halving on Bitcoin price, Garrick Hileman, the research head at Blockchain commented that:
Cryptocurrency markets are often very event-driven, and as we get closer to the next halving bitcoin’s price will receive a boost from those anticipating the forthcoming reduction in new supply. In the months leading up to the last two halving events, we saw bitcoin’s price steadily trend upward, and then power higher following the reward halving.
Hileman doesn’t see a significant change in mining hashrate due to the halving. He stated that:
Miners have historically shown a willingness to maintain or increase computing power through halving events because they expect future bitcoin price increases to offset the reduced block reward.