Some info on the Bitcoin Halving
Bitcoin halving is the event that happens every 210,000 blocks where the block reward issued by Bitcoin network protocol is cut in half. The block reward is payout (in bitcoin) every 10 minutes or so that miners receive for mining blocks, verifying transactions by solving the computational requirements. This can be viewed as Bitcoin’s answer to inflation as it’s code is programmed to reduce the influx of new coins in the market, thus making the asset more scarce.
Once the mining rewards are halved, the supply of this asset on exchanges is going to be lower. On the other hand, the interest in BTC trading and investing is projected to grow. Even more so because the new investment avenues, such as Fidelity, Bakkt and others are raising the attention of BTC as an investment. Of course, according to the laws of the market, where the supply is limited and the demand rises, the prices rise along with the demand.
So let’s look at the halving and sell pressure: The current block reward (roughly every 10 minutes) is 12.5 btc. This equates to 1800 btc per day that Miners earn securing the chain. A large portion of this daily payout is sold off to pay for the mining operations (a lot of this is electricity expenses to power the mining rigs). As the block reward is decreased to 6.25 btc each block (roughly every 10 minutes), the daily btc per day paid out drops to 900 btc (from the 1800).
If nothing else changed (seller pressure / buyer demand), then the price of a single btc would be driven up almost double in order to maintain the same costs of mining that it does today.
But that is never how it works. Instead, as the price is driven up when the rewards are needed for operations (think 3 to 6 months out from halving); then market as a whole will also start to FOMO in on the action. This increased buy demand further drives up the price, creating an uphill snowball effect where the continual rise in price fuels continual rise in demand fuels continual rise in price.
All we are saying is that there is something to this that is worth a look if you have not yet!
As always – if you have any questions, feel free to reach out.