During the past week (second week of May 2020) the much anticipated Bitcoin Halving Event happened and everyone rejoiced and now we are all rich.
Except… not really…
Today we are going to see what was this Halving Event all about, what it means and how can you (possibly) profit with it. But first things first…
What is a block halving event?
Gold as you know is a valuable finite resource which makes it’s value go up as the times passes. Bitcoin is the Gold of Cryptocurrencies and just like gold, it has a finite amount of “coins” available. These coins not yet all available as they are still being “mined”. This means that there are people called “miners” that “mine” bitcoins with the power of their GPUs. These miners are then rewarded with part of the coins they mine.
In the beginning, 50 Bitcoins per block were given as a reward to miners and after every 210,000 blocks are mined (approximately every 4 years), the reward halves until it becomes 0 (approximately by year 2140).
Last week the reward for mining was at 12.5 coins per block but this halving event brought it down to half of that (6.25).
Why was this done?
Bitcoin designed with the premise that over time, as it becomes scarcer and as long as the demand for it stays the same or increases, it’s value should go up. As a matter of fact, estimates predict that Bitcoin’s stock-to-flow ration should be higher than Gold by 2025, making it a better store of value.
Like Gold, Bitcoin is a deflationary currency which means it’s value goes up with time instead of the regular fiat currencies where inflation brings down it’s value.
$100 today has less value than it had 5 years ago but is more valuable than it will 5 years from now.
Who controls the issuance of Bitcoin?
Unlike fiat currencies where the federal reserve can print as much money they want as it is needed (like they are doing right now with all the bailouts), the insurance of Bitcoin is controlled by the network itself.
Bitcoin was designed to follow a set of rules:
- Bitcoin will cap at 21,000,000.
- New bitcoins are insured every 10-minutes.
- Halving event occurring every 210,000 blocks (approximately every 4 years)
- Block reward which starts at 50 and halves continually every halving event until it reaches 0 (approximately by year 2140)
History of Halving events and prices
- The first halving event occurred on the 28th of November 2012 and the price of Bitcoin was around $12.5.
- The second halving event occurred on the 9th of July 2016 and each Bitcoin costed around $660.
- The third halving event occurred on the 11th of May 2020 and Bitcoin’s price is was around $8000.
It is also worth noting that after a halving event Bitcoin’s price peaked approximately after 1.5 years and then it gets lower.
If history really repeats itself we should soon see a slight drop on the Bitcoin price and a new all time high in about 1.5 years from now.
How to start investing?
If you want to start investing but you don’t know how, don’t worry. Check out Coinbase, all you need to do to is create an account deposit any amount and start buying Bitcoin and other cryptocurrencies available.
deposit your Bitcoin into firstname.lastname@example.org
And start to trade
But remember, like I always say, do not invest money that you absolutely cannot afford to loose. Do not expect to make a quick profit. Be sure to do your due diligence.
I hope you liked this post, don’t forget to like and share with your friends and as always, see you next time.