Every 210,000 blocks (approximately every 4 years) since Bitcoin’s inception, the reward that miners receive for finding a block halves.
This event is referred to as the “Bitcoin halving” and was hard coded by Satoshi Nakamoto into the Bitcoin protocol to enforce its deflationary monetary policy.
Many argue that this is one of the “Killer Applications” of Bitcoin.
The reasoning for this is simple: the periodic halving has enabled Bitcoin to become the first form of money in history which total supply is known at all times, and where its inflation is controlled by nothing more than an algorithm.
In this article we will be covering 7 facts that you need to know about the 2020 Bitcoin halving, let’s dive right into it.
2020 Bitcoin halving facts
When is the 2020 Bitcoin halving?
The 2020 Bitcoin halving is expected to happen at the end of May.
However, keep in mind that the date of the halving is not decided by the normal calendar, but by the number of blocks that have been mined.
If difficulty drops a few times then the halving may happen a few weeks later.
Which Bitcoin halving is this?
The Bitcoin halving in May 2020 will be the third halving the currency undergoes. The first halving happened in November 2012, and the second one happened in July 2016. Both where the precedent for a significant wave of Bitcoin adoption.
What will Bitcoin’s inflation be after the halving?
In the 2020 Bitcoin halving mining rewards will drop from 12.5 Bitcoins per block, to 6.25 Bitcoins per block.
This will reduce Bitcoin’s yearly inflation to 1.8%, in contrast, Gold’s yearly inflation averages 3%. Meaning that Bitcoin will become even more scarce than Gold after the next halving (this is why many people call Bitcoin “Digital Gold”).
How many Bitcoins will be generated per day after the halving?
At a block reward of 12.5 Bitcoins per block and block time of 10 minutes, miners are currently generating 1,800 Bitcoins a day. After the 2020 Bitcoin halving, this number will be reduced to just 900 new Bitcoins per day.
How many bitcoins will there be at the time of the halving?
At the time of the 2020 halving, 18,375,000 Bitcoins will have been mined in total. That’s approximately 85% of the total Bitcoin supply.
Now, many estimate that over 25% of all Bitcoins have been already lost. This would mean that at the time of the halving there would in fact only be around 13,700,000 Bitcoin available. That’s not even 0.002 Bitcoin for every human on Earth!
What will the Bitcoin price be at the halving?
Both halvings that Bitcoin has had so far have had served as powerful price catalysts and they have been the best times ever for investing in cryptocurrency.
Right after the first halving in 2012, the Bitcoin price rose from $12 to $140. Weeks after the second halving in 2016, Bitcoin started a rally that propelled its price from $582 to $20,000.
The Bitcoin price has 2 main catalysts for a rally when a halving occurs.
- Buy the rumor, sell the news: Speculators like to buy an asset prior to an important event. This is not only true in crypto markets, but also in traditional equities. This effect is what caused Bitcoin’s price to rally 1 year prior to the halving in 2012 and 2016.
- Impact on the market of the reduced daily supply: After the halving occurs and speculators sell, the heavily reduced inflation will start kicking in. Instead of 1,800 new Bitcoin’s available per day, there will now only be 900 Bitcoins. This means that if there is more demand than 900 Bitcoins on a given day, the price will go up.
The past 2 halving rallies where exclusively fueled by retail money. However, all signs indicate that large institutions (like Fidelity, NASDAQ, and JP Morgan), are getting their Bitcoin investment infrastructure ready right in time for the Bitcoin halving.
It’s not too outlandish to think that they are aware of the impact of the Bitcoin halving and that they will be offering Bitcoin as an investment option to their millions of clients.
What do I need to do before the halving?
If you are a regular Bitcoin holder then there is nothing that you need to do. Unlike a hard fork, for example, you don’t need to move your coins to any specific Bitcoin wallet.
You can just keep your coins in your wallet like you regularly do. Simply sit back and relax, and watch how impressive it is to have a form of money that controls its own monetary policy.
On the other hand, if you are a Bitcoin miner you will have to closely monitor your profitability since your block reward will be reduced by 50%.
In the past 2 halvings, this profitability reduction was balanced out by a significant Bitcoin price rally before the rally, only time will tell if this time will be similar.
CoinDiligent Staff Writer