When is bitcoin halving happening?
Bitcoin halving is likely to happen on Monday, May 11 2020. The bitcoin halving countdown is close. What should happen? How can I buy bitcoin with the best rate? What is the strategy for bitcoin halving?
We summarized available information in this article below, most of the information is taken from crypto exchanges, like Kraken.
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Why Bitcoin? And what is bitcoin halving?
Bitcoin is the first digital currency to combine censorship-resistance, transaction immutability, and pseudonymity on a distributed settlement layer. Sounds great in theory, but how can we feel confident the bitcoin network enforces these standards? The answer is found in the process of “mining,” where network participants — miners — contribute computational resources to validate transactions. Validated transaction data is aggregated into containers, called blocks, which are recorded on an immutable, distributed ledger called a blockchain. Each block is cryptographically “chained” to the network, containing: metadata from the previous block, a timestamp, and transaction data.
Blocks are added to the bitcoin blockchain every 10 minutes, on average, and each block emits a reward of newly-minted bitcoin to miners who successfully validate a block. Currently, each block yields a reward of 12.5 bitcoins. At an average rate of 144 blocks per day, 1,800 new bitcoins (~3.9% annual inflation) are added to the circulating supply each day. As prescribed by the code behind the bitcoin network, bitcoin’s monetary policy exhibits a down-trending inflation rate until total supply approaches 21 million bitcoins in the year 2140; however, 99% of bitcoin’s supply will be minted by 2032.
Referred to as the “bitcoin halving,” the number of bitcoins created in each block algorithmically decreases by -50% every 210,000 blocks, or roughly every four years. It’s important to note that block rewards aren’t gradually diminished, but rather they are immediately halved as soon as the 210,000th block is mined. In other words, block 629,999 will yield 12.5 bitcoins while block 630,000 will yield 6.25 bitcoins.
Figure 1: Bitcoin Block Halving Schedule
Note: Inflation from era 1 is a 3-year average because annualized inflation for 2009 was infinite.
There have been two prior bitcoin halvings, the first occurring on November 28, 2012, and the second on July 8, 2016. The last satoshi1 will be mined on block 6,929,999, the block before the 33rd halving, when the mining reward will drop to 0 bitcoin, with a technical supply cap of 20,999,999.9769 bitcoins. Based on the block height of 615,350 as of January 31, 2020, the last bitcoin is expected to be mined in March 2140.
Historical Analysis
Analyzing the past two halvings in the network’s history reveals a trend of bull runs taking place around reward reduction events. Because prior bull runs began 12–18 months before the halving and ended 12–18 months following the halving, we found it useful to analyze these timeframes and label the “relative bottom” or “relative peak” when referring to price changes around the time of halving.
1st Halving
Bitcoin’s first halving took place on November 28, 2012 at block 210,000, reducing the block reward from 50 bitcoins to 25 bitcoins.
Assuming 144 blocks are mined per day, this event caused daily rewards to decline from 7,200 to 3,600 bitcoins.
Looking to figure 2, a local bull market began in November 2011, one year prior to the halving, and ended in December, 2013, one year later. This period is marked by a +50,162% trough-to-peak increase in bitcoin’s price. The uptrend later reversed in late-December 2013, descending into a multi-year bear market for bitcoin, marked by a drawdown of -80%.
Figure 2: BTCUSD Price Nov. 2011 — Dec. 2013
Source: Kraken, Blockchain.com
2nd Halving
The second halving event took place on July 9, 2016 at block 420,000, decreasing the block reward from 25 bitcoins to the current 12.5 bitcoins. On a daily basis, minting fell from 3,600 bitcoins to the current rate of 1,800 bitcoins per day.
Notably, the time between the first and second halving was only 1,316 days (3.6 years), falling nearly 150 days short of the widely expected 1,460 days (4 years). This anomaly can be attributed to mining growth outpacing the network’s mining difficulty adjustment since application-specific integrated circuits (ASICs), the fourth-generation bitcoin mining equipment, were introduced in February 2013 and supplanted both field-programmable gate arrays (FPGAs) and GPUs. Although the mining difficulty feature is automatically adjusted every 2,016 blocks, or approximately every two weeks, to accommodate mining growth while sustaining an average block discovery time of 10 minutes, the algorithm did not account for unusually rapid technological advancements such as the leap from GPU and FPGA mining to ASIC mining. Even the first iterations of these mining rigs were able to generate 20–50x more bitcoins per dollar invested than GPUs, which in turn drove immense miner demand.
Unlike the first halving, where a local bull trend began one year prior to the event, bitcoin experienced a second bull run, this time beginning nine months prior. This event ostensibly straddles the infamous bull run of 2017, when bitcoin prices flirted with a price of $20,000. This bull run saw a +9,054% appreciation in price between the relative price bottom of $213 on September 21st, 2015 and the relative price peak of $19,499 on December 16th 2017, 18 months after the second halving. Similar to the first halving, this parabolic bull run resulted in a drawdown of -80%, bottoming out in December 2018.
Figure 3: BTCUSD Price Sept. 2015 — Dec. 2017
Source: Kraken, Blockchain.com
Macro Perspective
Taking a step back, commonality between both halving events indicate a 2-year uptrend in bitcoin price around halving events followed by a 12–18 month, roughly -80% peak-to-trough downtrend. The relative price peak surrounding the first halving in November 2012 reached $1,151 in December 2013 almost exactly one year after the halving event. Nearly two years later, bitcoin’s price retraced -81.5% to $213 in August 2015 before the second halving’s bull-market cycle began. The second halving’s local bull market ended nearly two and a half years later in December 2017 as price topped out at $19,499. Similarly to the first halving, price retraced -83% and ostensibly bottomed out at $3,225 in late-December 2018, one year later. Price has since partially recovered to $9,300 as of January 31st, 2020, representing an increase of +188% YoY.
Figure 4: BTCUSD Price Jan. 2009 — Jan. 2020
Source: Kraken, Blockchain.com
Event Significance
“It’s more typical of a precious metal. Instead of the supply changing to keep the value the same, the supply is predetermined and the value changes. As the number of users grows, the value per coin increases. It has the potential for a positive feedback loop; as users increase, the value goes up, which could attract more users to take advantage of the increasing value.”
- Satoshi Nakamoto
The halving is critical to helping bitcoin satisfy the definition of sound money. Because the minting process is subject to 50% reductions, bitcoin supply follows a disinflationary curve. The upcoming halving will reduce annual supply inflation from a rate of 3.7% to 1.8%. This marks the first time in history that Bitcoin’s inflation rate will fall below the 2% inflation target used by most central banks for their respective fiat currencies.
Disinflationary assets such as gold have proven to be a better store of value than inflationary assets (e.g., fiat currency). Serving as an anecdote, the British pound sterling, the longest standing fiat currency at 317 years, has lost more than
99.5% of its value since inception.4 Notably, this price decline does not account for the price depreciation of silver, as the pound was originally defined as 12 ounces of silver. In other words, arguably the most successful currency in history is worth less than 0.5% of its value due to its inflationary nature. On the other hand, since the U.S. officially ended its ad-herence to the gold standard in 1973, the value of gold has appreciated by +1,760% while the U.S. dollar experienced a cumulative inflation rate of 472.53% within the same timeframe; namely, $1 in 1973 had the same purchasing power as $5.73 does today.
Figure 5: Real Purchasing Power (Inflation-adjusted)
Source: Kraken, Blockchain.com
Celebrate bitcoin halving with BestRate!
We expect the prices to go up and down significantly, so we recommend using crypto trading bots, to automate your crypto trades. Using our algorithms each crypto trade will become more efficient.
More over, you can add several crypto exchange accounts to see your crypto portfolio in one place.
If you wish to buy bitcoin, you can do this via aggregator of crypto exchanges.
If you like to get paid in bitcoin, use BestRate payment gateways to automate these processes.
All BestRate products include a 30 days trial period. Sign up!
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