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Key facts:
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Analysts suggest that the event will be different from the reductions that occurred in 2016 and 2012.
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Everything happens in the midst of a pandemic, recession and central banks testing digital currencies.
As if it were an Olympic Games or a soccer world cup, the halving Bitcoin is an event that occurs every four years. In this third edition, scheduled to happen in about 12 days, there are aspects that clearly differentiate it from what happened in 2016 and 2012.
The reduction of the issuance of coins from 12.5 BTC to 6.25 BTC, per mined block, is a momentous event in the Bitcoin network that will affect everything; from digital mining itself, to cryptocurrency markets, and to application development.
It is a season in which bitcoin captures more media attention with large chains talking about the subject and millions of users consulting the Internet about what is the halving of bitcoin.
Due to the interest it arouses, inside and outside the cryptocurrency community, it is time to review the conditions that will frame this event.
A new panorama
According to a study carried out by the firm Cryptocompare, the current cryptocurrency market is very different from that of 2016. In that year the volume of daily exchanges in the exchange houses, related to the first cryptocurrency, rarely exceeded one billion Dollars. Today that number reaches $ 20 billion.
The report indicates that, unlike the halving of bitcoin from 2016 and 2012, this time miners are “smaller players” within the ecosystem. On this point, the researchers point out:
In 2016 miners probably had a much greater impact on the price of bitcoin, as the miners selling their bitcoins represented a larger and more impactful component (…) we could now expect a lesser impact in the months after halving May of this year and, therefore, a smaller increase in the price.
Cryptocompare.
Another aspect to consider is the hashrate or network processing power, which could be affected by halving of bitcoin.
According to the TokenInsight metrics, the profitability of the S9 miners, in 2016, went from about $ 20 a day, prior to halving, to about eight dollars a day after the reduction of incentives for miners. Currently S17 miners would be generating less than $ 5 a day before halving, which would eliminate its profitability in the near future.
From the above it follows that it is S9 miners likely to be phased out after halving bitcoin since they would become inefficient. In addition, it must be considered that, once the issuance of currency has been reduced, an increase in network transaction fees could occur in the short term; this due to a potential increase in activity with the current level of difficulty.
External elements
As well as internal aspects are raised in the network about the next halving of bitcoin, you also have to consider all the external elements that are influencing, in one way or another, what happens with BTC and the cryptocurrency market.
The main point to consider is the spread of the SARS-CoV-2 coronavirus pandemic and COVID-19 disease. The international health crisis has already left more than 3.2 million people infected and 235,000 dead, without a vaccine against this disease still in existence.
On March 11, the World Health Organization (WHO) declared a global pandemic due to coronavirus, which caused a collapse in the price of bitcoin, going from around $ 8,000 to less than $ 4,000 in less than 24 hours.
Due to this situation, many countries have totally or partially stopped their economies, causing a low demand for raw materials. The panorama prior to halving bitcoin also encountered an unprecedented situation, negative oil prices for the first time in its history.
This without adding that the world lives in a time when many countries are already testing their own digital currency projects. Even Facebook’s Libra has just changed course with a basket of stablecoins, a few days after the halving.
In the midst of all this economic turmoil, bitcoin has performed even better than gold, with higher profitability so far this year and facing its first major crisis since it was created in 2008.
Now, just days after the occurrence of halving of bitcoin, it remains to wait how the markets will react, how this new phase in cryptocurrency mining will be assumed and most importantly, how this project will be outlined in the coming years for greater adoption.
