2016 would be another interesting year for the price of bitcoin. One of the highlights is the so called „Bitcoin Block Reward Halving“ event which is taking place soon.
What is the Bitcoin Halving“?
Bitcoin is a digital currency produced by miners with high-performance computers which are equipped with computer chips developed for the mining tasks only. The mining process is a competition of mining pools to be the first to add blocks of transaction data to the bitcoin blockchain. Every time they successfully complete a new block and provide a proof of work, they receive a reward. The Bitcoin block mining reward halves geometrically by 50% every 210,000 blocks, which happened the last time 4 years ago on November 28th 2012, when the original coin reward decreased from 50 to 25 bitcoins. This week it will drop again to 12.5 bitcoins on or around 9th July. The main reason why this is done is to keep inflation under control. This reward will continue to “halve” until 21 million bitcoins have been created, which is the current cap of how many coins will ever be issued.
With increased performance power necessary and decreased rewards it becomes harder and harder to mine bitcoins.
As a result of the limited supply, it will maintain its value and hopefully turn out to be an international medium of exchange and store of value for the future.
What happens to the Price?
The upcoming halving event has been expected by market observers for years and many investors showed increased interest in the last months betting on the outcome. Their expectations will soon meet reality and positions would be readjusted accordingly.
There are many predictions about what would happen to the price of bitcoin, but most experts in the community expect not much, the price might be a higher price or just stay the same after the halving.
Some market experts predicted bitcoin will keep rising, which is a possible scenario since higher demand could meet a declining number of bitcoin owners willing to sell. This means bitcoin prices would slowly but steadily increase.
Short-term volatility led by speculative trading activity could be the immediate effect, but since volatility is a natural part of bitcoin trading
this development will have a limited effect on the price, as it was not substantial the last time a halving took place.
Technical and economic repercussions will be the result of the halving event and some miners will be coming under pressure and give up mining, forcing the price to move up.
Some might look to halving events with anxiety, speculating that it may make it economically unfeasible for them to stay in business.
In general halving events should be seen as a sign of network maturity, because it represents a huge milestone for the world’s largest and most powerful (cryptographically secure) distributed computing project.
(More details about expectations of market experts in this article on coindesk)
What happens on the block halving day?
Bitcoin Community members and meetup groups all over the world will throw a block halving party tomorrow to commemorate this historical day for bitcoin which happens only every 4 years.
Why not check if your local bitcoin meetup is organizing something as well and join the celebration with some fellow bitcoin enthusiasts?