The halving of Bitcoin mining reward is expected to happen this July 10~12, 2016. Unlike fiat-money and reserve currencies, Bitcoin has only a total of 21 million supplies since Satoshi Nakamoto released the code in 2008. Opposing to other currencies which can be printed by central banks, Bitcoin’s supply is finite, which is according to the rules of the system. Since it is deflationary in nature, the cryptocurrency is often compared to gold, which is also literally mined.
Bitcoin mining is a process of securing and processing transactions mathematically in the blockchain or in the Bitcoin network. The process requires an immense amount of electricity and computing power. The protocol rewards miners with 25 bitcoins for each block of transactions found and the coming halving will cut it off into a half. The halving takes place at block 420,000 and happens roughly once every four years.
This halving is already the second time in history since the last four years. The first one happened on November 28, 2012, at block 210,000 and there was no significant impact on the price of Bitcoin which was at 13.40 USD at that time.
How will it affect Bitcoin’s price?
Mining reward halving means that the generation of Bitcoins in the network will slow down in a much lower rate. According to a simple economic law, if the demand remains even while the supply declines or is cut into half, the price of Bitcoin should go up until supply and demand will reach a new balance.
In view of the past result of the mining reward halving and the rise of Bitcoin awareness, it is still hard to predict whether Bitcoin’s price will go skyrocketing or will just remain stable after the said event. Aside from the decline of supply, there are still a lot of aspects involved that could affect the price of Bitcoin.
As Andreas Antonopoulos, author of “Mastering Bitcoin” and a Bitcoin security expert, said that the impact of the mining reward halving on the value of Bitcoin relies on a wide range of factors, involving difficulties and transaction volume of the cryptocurrency. He also added that whoever predicts the price even for just ten minutes is lying because no one can predict the price including him. He also explains that the reward halving will affect the economy in general, base on the state of all the other parameters in the economy such as the transaction volume, price adoption, difficulty, hash rate, investments, world market conditions, other currencies and much more.
A week Bitcoin Price surge!
Bitcoin’s price surged at 20% this May 29 to June 3 and is the highest point in 20 months. What is the possible cause?
There are speculations that Chinese markets caused the abrupt rise of the price of the Bitcoin. According to Wall Street Journal, the two well-known Bitcoin exchanges in China namely, OKCoin and Huobi, created a 92% share in the global trading during the length of the price increase. Other factors may be added in the price surge as the mining reward halving is coming soon.
Factors that could affect the price negatively
However, we should not ignore that there are also factors that are likely to pull the price of Bitcoin down. One is the ongoing struggle in the Bitcoin community in finding a solution to the problem in block size scaling. Even though there have been grounds enclosed during the Scaling Bitcoin Conference in Hong Kong in December last year, the debate on whether to execute either of the Bitcoin Improvement Proposals: BIP 100, BIP 101 or BIP 102 is still a struggle. These could result in a risky abrupt global upgrade or a ‘hard fork’ changing of Bitcoin’s rules. This condition is now a concern to some in the Bitcoin community, especially to the investors.
On the other hand, taking the optimistic view of the most Bitcoin enthusiast, this year might turn out to be the golden year for Bitcoin, considering the halving, the exposure to mainstream media, and the fast adaptation to major companies of Bitcoin.