If you follow cryptocurrency, you may well have heard about the upcoming Bitcoin halving, or halvening. So, what on earth is a halvening and what could it mean for the price of BTC?
What is it? – The halving refers to the reward paid to miners being reduced in half. Miners add “blocks” to the blockchain by performing transactions. Currently they earn 12.5 Bitcoins for each block added, but that will reduce to 6.25 Bitcoins.
When will it happen? – One block is added to the Bitcoin blockchain roughly every 10 minutes. Halvings typically occur every four years or so and this will be the third halving to date. If nothing major changes it is due to take place in May 2020.
What effect will the halving have on the price of Bitcoin? – Well, nobody knows, but previous halvings have seen an increase in the price of Bitcoin. The simple theory goes that as supply is cut short, miners will charge a higher price for their Bitcoins. The number of Bitcoins to be mined is fixed at 21 million, so each cut in new supply makes Bitcoin more scarce, and therefore more valuable. However, past performance is no indicator of future results. Some commentators believe the halving is already priced in, while others are predicting a severe drop in price before the halving even takes place.
Here’s an interesting price chart showing the previous halving dates.
My view is that Bitcoin is worth accumulating whenever the price dips, as it will pay off in the long run. However, price volatility can be severe and cautious investors should, of course, be careful of overcommitting. Crypto investing is not for the faint hearted, but it will be interesting to watch what happens after May next year.
Disclaimer: This should go without saying, but the information contained in this blog is not investment advice, or an incentive to invest, and should not be considered as such. This is for information only.