What you should know about Bitcoin halving
16th Feb 2021 Technology
The question in your mind right now is most likely, what is Bitcoin halving. You could even be asking, why is Bitcoin halving important? Well, these are reasonable questions because halving does not occur with fiat currency.
Bitcoin was among the first cryptocurrencies to appear in the market. Its popularity has been growing over the years. Today, Bitcoin is among the most popular cryptocurrencies. It's not surprising that online trading sites have even opted to highlight places where people can spend Bitcoin, for more you can try this
However, most people don't know much about Bitcoin. As such, terms like Bitcoin halving are new to some people. This article explains Bitcoin halving, why it's essential, and when it occurs.
What is Bitcoin halving?
Bitcoin halving is the event during which miners get half the reward for the new blocks. That means miners get 50% fewer Bitcoins for verified transactions. Typically, Bitcoin halving happens once in every 210,000 blocks. That's about every four years. And, this halving will continue until the network generates the maximum supply of 21 million.
Why is Bitcoin halving important?
Bitcoin halving is essential for a trader because it minimizes the total number of Bitcoins that the network generates. Essentially, Bitcoin halving limits new coins' supply. And this is beneficial because prices can rise if Bitcoin demand remained strong.
And this has happened in the past, both before and after halving, and caused rapid appreciation of Bitcoin price. Nevertheless, the circumstances that surround each halving differ. What's more, Bitcoin demand fluctuates wildly.
Next Bitcoin halving?
The next halving of this cryptocurrency is likely to happen around 2024. At this time, the number of Bitcoin blocks will hit 740,000. Block reward will drop to 3.125 new Bitcoins. The total number of new Bitcoins will be 656 250 coins.
Essentially, Bitcoin halving will continue until 2140. That's when people will have mined all 21 million coins.
Trading Bitcoin halving in 2020
You can trade Bitcoin halving in two ways in 2020. You can buy Bitcoin via an exchange or speculate on this cryptocurrency's price via derivatives like CFDs.
Among the main benefits of trading Bitcoin with derivatives is that you don't own the underlying coin. And, this is beneficial for several reasons.
- Trade without a wallet or an exchange account: When you trade without a wallet or an exchange account, you don't own the underlying asset.
- Go short or long: You can take a Bitcoin position by speculating whether its price will fall or rise based on its value.
- Take leverage advantage: You put deposit funds and open your position. Leverage gives you a chance to gain more extensive exposure to the financial market while tying up a small capital amount. This leverage magnifies both losses and gains in scope.
How Bitcoin halving can affect its price
It's hard to determine how the next Bitcoin halving will affect its price. However, some commentators believe that Bitcoin price will follow the same path. That means the price is likely to rise in advance because of more news coverage. After halving, the price might also increase due to the constraining of new coins' supply.
However, demand for new Bitcoins will determine whether the price will rise. And, Bitcoin demand will most likely increase or remain static. That's because the Bitcoin market has undergone significant maturity since its last halving. What's more, Bitcoin is not facing considerable competition from the other cryptocurrencies.
Parting shot
The underlying Bitcoin's blockchain software dictates the rate of Bitcoin creation. This software compels computers in its network to compete in verifying transactions via a mining process. The system rewards miners with a specific number of new coins for valid transactions. Blocks are the groups in which transactions' verification occurs. The Bitcoin network's coding requires it to halve the miners' reward every 210,000 blocks.
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