Within one week, the Bitcoin network will undergo a major change. Bitcoin block reward halving is scheduled to happen on the 9th of this month. Once it happens, the mining rewards for discovering each new block by the miners will be reduced to 12.5 freshly minted bitcoins from the existing 25 bitcoins. This will effectively reduce the amount of new bitcoins introduced into circulation.
The creator(s) of Bitcoin have deliberately incorporated this feature to ensure the value of the digital currency doesn’t drop and to delay the time taken to mine all 21 million bitcoins. It will also promote competition among miners to gain the maximum share of the newly minted digital currency until bitcoin adoption reaches a critical threshold after which it will become self-sustainable. However, the drastic cut in the rewards also comes with own set of drawbacks.
What Does Halving Have in Store for the Bitcoin Price?
The Bitcoin community is already speculating the effects of halving on the value of bitcoin, mining activity, and other aspects of the digital currency ecosystem. The opinion of the community is divided about the pricing aspect, as some believe that the value of bitcoin will start to soar after halving, while others think the effect will be completely opposite.
One popular opinion going around in the media in the past couple of days leans towards the positive side, claiming that the bitcoin price will continue to increase after halving. According to this theory, halving will not be directly responsible for the fall in bitcoin prices or destabilization of the digital currency. But this theory doesn’t factor other external factors which may cause the bitcoin price to move either way following the network halving.
External market factors play an important role in the increase or decrease of bitcoin value. We have already seen few instances in the recent months, where the price fluctuations were influenced by the changes in the global economic system viz., the devaluation of yuan, Brexit and more. Even gold, the universally accepted, de-facto medium of value exchange has been showing trends similar to that of the digital currency,
On the other hand, the mining community may also see few miners quit bitcoin mining following the halving unless bitcoin’s price continues to maintain an upward trend. The ones calling it quits will be those still running older mining hardware, which are more energy intensive with reduced processing power, rendering them unable to recover the mining costs.
Bitcoin has been going strong for more than a month now. If the trend continues, then we can expect halving to have minimal impact on the network and pricing. Either way, we will start seeing the signs by next week.
Ref: T3N |Quartz | Image: Bitcoin Block Half