In April, the next Bitcoin Halving is pending
Then the reward which miner get for the creation of a bitcoin (BTC) is halved. It is already the fourth halving since the emergence of this cryptocurrency. Approximately every four years a halving happens, whereby the value always gets more near to zero. But what does that mean for the world of crypto? Which advantages and disadvantages brings the halving along?
The current situation
Currently, there rules a bull market in the crypto area. The reason for this is the new Spot ETF of Bitcoin, which was published only a short while ago. ETFs are exchange-traded funds, and Spot means in this connection that bitcoins are acquired to the current market price. So Spot ETFs enable a direct investment in Bitcoin. But one neither have to deal with the blockchain technology nor with the custody of the coins, like it is the case with usual investments in BTC. That opens a bigger target audience access to this cryptocurrency. After the success of the Spot ETF from Bitcoin, also Spot ETFs from the cryptocurrency Ethereum are in debate.
The occurrence of the Bitcoin ETFs caused that the prices rose. Responsible for that is the raised demand of the cryptocurrency which was associated with the occurrence of the new ETFs. The price is going straight upwards by now. But not only the ETFs but also the upcoming Halving can be a trigger for this.
So does the halving work
The next Bitcoin Halving is slated for the 20th of April. Bitcoin is liable to the Proof-of-work concept. That means, that bitcoin miner get rewards for the digging of blocks for the blockchain. For this they use the energy of their computers as well as servers. Currently, the reward for the creation of one block amounts to 6.25 Bitcoin. With the halving this reward halves itself and after that amounts 3.125. Since the emergence of Bitcoin in 2008 three halvings took place.
That means, the reward amounted 50 BTC in the beginning. Furthermore, it means that the value will reach 0 sometime in the future and the miners then don’t get rewards for the digging any more (despite the transaction charges). If you calculate further, this is the case in the year 2140. Then the defined stock of Bitcoins of 21 billion BTC is achieved.
What does that mean for the miners?
The halving has a big impact on the miners. Namely on this day, their revenues are halved. That can lead to the opportunity that some miner cop out and look for other revenue streams. For the remaining miners this means more work; they have to increase the efficiency.
When in the year 2140 all the coins are mined, it does not mean that miners are not needed any more. Their work then will consist of the validation and confirmation of transactions. They already accomplish this tasks besides the digging. Only the production of new Bitcoins will stay away after 2140.
The advantages and disadvantages
The halving also brings some advantages and disadvantages along. In the past, after every halving a bull market has developed. The prices of Bitcoin rocket upwards, what especially benefits the Bitcoin owner who want to alight from the market. Although we already experience a bull market it is likely that the Bitcoin price will rise further after the 20th of April. Namely, in these days the offer diminishes because there are expected to be less miner then. And with a steady demand, this leads to a higher price. Currently, the price amounts to 50 GBP. Another sure can be expectable.
By contrast, the circumstances of the halving are less viable for mining companies and the miners themselves, especially because they already have to deal with rising energy prices right now. As a sequel, particular mining companies could disappear from the market after the halving. Consequently, the halving all in all is a big chance for every investor though adverse for all miners.
Author:
Maximilian Schmidt is CEO of the CPI Technologies GmbH. The company is specialized in software development in the areas artificial intelligence, blockchain and digital product development. On the 9th of April CPI is sponsor of the Frankfurt Tokenization Summit where anyone interested can experience more about the topic tokenization. https://www.tokenizationsummit.de/
Statements of the author and the interviewee do not necessarily represent the editors and the publisher opinion again.
