BITCOIN HALVING AND ITS DETAILED ANALYSIS!

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BITCOIN HALVING AND ITS DETAILED ANALYSIS!

Introduction:

Bitcoin halving takes place once every four years, and it is an event of great interest for investors due to its significant effect on digital currency. The miners’ number of tokens for linking the new transaction to the blockchain is divided in half. This process is known as Halving. Halving has profound significance in the price of Bitcoin. 

  • Brief analysis on Bitcoin Halving: 

Blockchain, the underlying technology of Bitcoin, consists of a series of computers running on Bitcoin’s software and carries a record of transactions occurring on its server.

  • After every four years, the mining of 210,000 blocks takes place. The block award is divided in half and awarded to Bitcoin miners to carry out the exchanges. 
  • This method further elevates the rate of releasing newly mined Bitcoins into the process. Bitcoin uses a synthetic form of expansion that halves and releases every Bitcoin into the course after four years.
  • This process will continue until 2040, and at that stage, Bitcoin miners will be awarded wages for carrying on transactions that the users will pay.
  • Bitcoin halving is essential because it is a sign of conclusion for the Bitcoin supply, which is 21 million in total.
  • After the initial Halving, the block reward was 25 and then 12.5 gradually, and as per May 2020, it is 6.25 bitcoins. Trading Bitcoin is highly intimidating for beginners. Click profitedge.org to learn some basic techniques in trading.
  • Reasons behind Bitcoin halving:

The stability of the Bitcoin supply is achieved at 21 million units when the creation of any new Bitcoin will stop.

  • Bitcoin halving guarantees that the total quantity of Bitcoin that one can mine with every block minimizes, making the digital currency valuable and scarce.
  • Judiciously, the inducement for mining the digital currency would fall with the accomplishment of each Halving. 
  • The significant price volatility of Bitcoin marks halving, allowing miners to mine further as the rewards are bisected.
  • The price rise encourages miners to proceed with the mining. On the other hand, if the price does not rise on dividing the block rewards, miners will not be enthusiastic enough to mine any more cryptocurrency. The reason being mining Bitcoin demands a vast amount of computational power and electric energy, which is costly.
  • Relation between Bitcoin halving and its price:

Developers suggest that there is a positive connection between Bitcoin halving and the surge in its price. One should also keep in mind that halving alone does not affect the price of Bitcoin, and several other factors contribute to it.

  1. First Halving – this event took place in 2012 when the price of Bitcoin was $11 and surged to $12. Within one year, the price skyrocketed to $1,100.
  2. Second Halving – an incident in 2016 occurred when the Bitcoin network completed 420,000, leading to the second Halving. The price of Bitcoin then fluctuated between $500 to $1000 for a few months before finally reaching $20,000 by the end of 2012.
  3. Third Halving – this took place in 2020, marking the beginning of a massive price surge. At the time of Halving, the price of a Bitcoin was $9000, and by the end of 2020, it was nearly $20,000.
  4. Implications of halving:

Halving lowers the rate of production of new coins, and this reduces the availability of supply.

  • As seen in the past, Bitcoin halving has resulted in an excellent price surge.
  • Elon Musk, the CEO of Tesla, declared that Tesla would cease accepting Bitcoin payments, resulting in further fluctuations in price.
  • If Halving does not increase the demand and value of the digital asset, then miners will have no cause in Bitcoin mining.
  • Factual evidence has shown that the price of bitcoin tends to go up months before the expected Halving.

Conclusion:

The schedule for the last Bitcoin halving to take place is in 2040. After which, remittance of block rewards will be in a different form other than Bitcoin.

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