What is halving?
May 2020 is going to be crucial for Bitcoin due to the event called “halving”. It is a process of reducing the pace at which new cryptocurrency units are being generated.
Halving occurs once every 210 000 blocks (approximately every 4 years) until the maximum output of 21 000 000 BTC is reached. This sets its own implications on mining as well, traditionally making miners lives more complicated, since their reward drops twofold.
Why is it necessary?
Halving is an inherent part of cryptocurrency economic model. The main halving goal is to provide stable cryptocurrency emission and restrain its inflation. Such controllable inflation level is one of the differences between crypto and fiat currencies – the latter in fact have infinite circulating supply.
How does halving affect the Bitcoin price?
After several months of two previous halving events back in 2012 and 2016, Bitcoin price appreciated rapidly. According to fundamental supply and demand principles, the less Bitcoin is generated by the network over a period of time, the more valuable it becomes. If the demand remains strong, we can potentially witness increased volatility after halving takes place this year.
Who can benefit from halving in 2020?
2020 is going to be very significant for the dominant cryptocurrency. Upon reaching block 630 000, miners reward will fall from 12.5 to 6.25 Bitcoins. Nevertheless, the halving mechanism ensures that Bitcoin stays deflationary at its core. It is still a matter of debate how volatile Bitcoin rate can become this time, but there are several ways to trade 2020 Bitcoin’s halving:
- Take advantage of 1:10 leverage: go long or short whether you expect the value of Bitcoin to rise or fall.
- Buy crypto directly from the exchange.