Good day, my fellow investing enthusiasts. Today I want to talk about an important occurrence in the cryptocurrency space. The Bitcoin halving event. This will be the third time that bitcoin will undergo this special occasion so let me try to enlighten you about the implications that come with it!
Bitcoin is scheduled to have its third halving in a couple of days. So-called miners verify bitcoin transactions by basically cracking a code with their computing power. Multiple transactions are put together. This set of transactions is called a block. Every time a block is mined, the miner will get a reward in the form of new-minted Bitcoin. Bitcoin undergoes a halving event every 210.000 of these blocks. Since mining a block takes approximately 10 minutes, this comes down to around 4 years.
Since you now know the basics of bitcoin transactions and how they happen, we can get a bit deeper into what exactly happens ones 210.000 blocks are mined. As I said before, miners are rewarded with bitcoin ones a block is mined. The reward for such a block is 12,5 bitcoin at the moment. After the next halving event, this amount goes down to 6.25 coins per block.
This way people can rely on a known controlled supply which makes it easy to calculate what the current inflation rate of Bitcoin is. We can also easily know the future inflation rate as well as the circulation and the number of coins that still have to be mined.
What will this do to the price? This is a question that some of you might have at the moment. The best answer that I (and probably anyone) can give you, is that we have no idea. Staying honest as always! The only thing we can do is look at past events. This, of course, gives us no insurance for what will happen in the future.
We do know that less Bitcoin will be created. This theoretically means that less new money needs to flow into the market to sustain the same price. But this does not mean that prices should (instantly) go up. Inexperienced buyers could easily get disappointed which can cause them to sell and drive prices lower.
Let’s just end this way; The halving event is one of the most important and exciting events in the cryptocurrency space and I can’t wait to see what the next 1-2 years will bring!