A little more than a month and a half left for the third bitcoin halving and the entire cryptocurrency industry has its sights set on this event scheduled in its software. In the first halving, which took place on november 28, 2012, bitcoin was worth $ 12.31. The second happened on July 9, 2016 and, as Binance remembers, bitcoin was then worth $ 650.63. At the price of this third party we will know when the day comes.
What is halving? What happens and why? bitcoin is built on a deflationary model. This means that every 210,000 blocks (approximately every 4 years) the amount of coins miners receive when confirming a block (known as a reward) is halved. In this third halving this reward will be reduced from 12.5 to 6.25 BTC. In this way, the total issue of bitcoins, estimated at 21,000,000, is delayed.
The miners, the first affected
The reduction in reward has direct consequences on the cost of mining, as each miner will receive a smaller amount of money. This means that if the cost of production is greater than the profit, you may decide to shut down your equipment and stop adding processing power to the network. Currently, according to some analyzes, the cost to mine a bitcoin varies between 6,000 and 8,000 dollars. After the halving, analysts estimate the cost will be around $ 12,000 or $ 15,000 per BTC. If the price of the cryptocurrency hovers around $ 6,600, post halving mining would not be productive.
Despite this estimate, the price of bitcoin has always increased after each halving. As supply is halved and current demand is maintained, the unit price of each currency increases. It also often happens that when there is a pronounced growth, investors buy more bitcoins, to take advantage of the escalation.
What happens then with the market?
It is important to clarify that any prediction about the price of bitcoin is only a conjecture and that we cannot be sure of how the market will behave. Speculation around the post halving outlook points, for the most part, to a significant price increase. Analyst Rekt Capital, based on the behavior of the previous reductions, estimates that the price may reach about $ 15,000 in the following months. On the other hand, the German bank Bayern LB published a report in which, evaluating the ratio of existence and flows of bitcoin for May 2020, there could be a dizzying increase that would take the price of the currency to $ 90,000.
These two analyzes were carried out last September, when the Covid-19 was not yet in the news anywhere in the world. During the month of March, the declaration of a pandemic and the expansion of the coronavirus to the West caused a fall in the traditional financial market, as well as in cryptocurrencies.
The halving narrative is dead
On March 9, the creator of the cryptoactive market analysis website Messari, Ryan Selkis, published a long text evaluating the impact of the coronavirus on western society. Regarding cryptocurrencies, he said that bitcoin was not a haven from inflation, but a risky asset and claimed that the halving narrative was dead.
Regardless, the crypto market grew after that small drop. As for BTC as a haven, measures by the United States government and the Federal Reserve to print more dollars to buy shares and keep the traditional market afloat, the price of bitcoin did increase. Although no one can guarantee anything about its future price, its value is likely to increase. The causes must be sought both in the collapse of the traditional economy, which is once again entering a strong recession, and in the alteration of the supply of new bitcoins thanks to halving.
Asia and europe miners disconnected
As for mining, Bitcoin’s hashrate has dropped in recent weeks. The business director of one of the largest mining pools, F2Pool, reported that they had lost 10% of their clients’ processing power and that for other competitors in the area this figure reached 30%. Most of the miners who went offline belong to parts of Asia and europe. Coincidentally, the areas most affected by the quarantine and other measures taken to stop the Covid-19 pandemic.
There is also an important aspect and it is the relationship of the impact of mining with the environment. It is commonplace among Bitcoin detractors to say that mining is a highly polluting factor. However, the shutdown of companies worldwide has decreased carbon emissions, especially in highly polluted areas of China.
However, due to the costs we have already mentioned, Bitcoin miners are looking for cheaper renewable energy, as well as areas with cold environments that eliminate the need to use cooling devices. All these issues, added to the other economic and usability benefits of bitcoin, can make us think that it is the ideal currency during and after the pandemic.