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The miners’ pay was cut in half on Monday night. Bitcoin investors previously made cash. The course breaks. These are the most important questions and answers.
Bitcoin’s halving reduces the reward miners receive for completing a block.
The course for the future of the Bitcoin digital currency was adjusted Monday night in a half call.
Bitcoin inventors have provided two types of inflation protection for the digital currency. On the one hand, the number of bitcoins that can be issued is limited to 21 million pieces. On the other hand, halving continually reduces the Bitcoin miner’s fee, reducing the monetary incentive to mine new Bitcoins.
The Bitcoin network processes the transactions by collecting all the transactions from a certain period of time and putting them together in a list: the so-called block. The miner’s job is to confirm these transactions and enter them in a public access account book (blockchain). In exchange for verifying if the ordered transaction does not conflict with the previous transaction history, the fastest confirming transaction miner receives new bitcoins.
After the creation of 210,000 new blocks on the Bitcoin blockchain, the remuneration for miners who put the block on the blockchain is halved. A new block is created every ten minutes. Block 630 001 was created on Monday night. The rate for this block will be reduced for the mining company from 12.5 to 6.25 bitcoins. The next halving of the miner’s wages will take place in block 840,000 in 2024.
Bitcoin’s young life saw two halves of the miner’s wages in 2012 and 2016. In the first half in 2012, Bitcoin’s price rose 8000% in the next twelve months. In 2016, it increased by 290% after the event and in the same period. Unlike today, Bitcoin was still an “insider” at the time and was therefore easier to influence. The “Bitcoin brothers” Cash and SV also make halves. These coins were separated from the mother currency due to technical differences of opinion. The halving of Bitcoin Cash in April did not lead to a price increase, on the contrary. Cash miners are believed to have started mining classic bitcoins due to lower wages.
Shortly before halving, Bitcoin’s price plummeted to around $ 8,600. On Friday night, the share price briefly passed the $ 10,000 mark after rising since mid-March. This doubling since March led many observers, at least in part, to the next halving.
Because Bitcoin is a very liquid asset, the digital currency reacts relatively directly to high price losses on the stock exchanges despite the supposedly low correlation with financial markets. When market participants panic and instinctively turn everything that is liquid into cash, they also repel bitcoins. The bear markets of February and March also showed that investors sell cryptocurrencies to satisfy margin calls due to short selling of securities. In the long term, the constant expansion of the money supply by central banks, the institutionalization of cryptocurrencies, the growing acceptance of Bitcoin and the like, along with protection against inflation, should lead to an increase in prices.
“The same increase is unlikely to happen as in the previous half,” says Alain Kunz, a member of the Obolus board of directors. But halving limits supply in half, supporting the price. The event was not fully anticipated. That would mean that all market participants were informed. Kunz expects Bitcoin to develop favorably in the coming months due to the growing acceptance of this digital asset. The adaptation in the broader mass is reflected in the number of Bitcoin addresses, which continue to grow in double digits. As you can see with gold, more and more investors and savers diversified their portfolios with Bitcoins for reasons of protection against inflation.
