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Considered one of the most critical events in the Bitcoin community, the Bitcoin reward halving is the process by which the incentives available to miners decrease by half of what it currently is. Founder Satoshi Nakamoto implemented the Bitcoin Halving mechanism to incentivize the network and slowly distribute the 21 million currency supply.
Historically, the Bitcoin reward halving has been known to be a prelude to a massive bull run. However, on 9 July 2016, the market saw a surprising turn of events during the last halving event. When the rewards fell from 25 Bitcoins per block to 12.5, we saw an instant surge to $650. Later next month, the trend continued, with Bitcoin reaching $2500. Finally, as the year ended, the market saw its highest demand, pushing the price way above $20,000.
Despite the market reaching new all-time highs, the 2016 halving event was nothing compared to 2012. With Bitcoin hanging at $11 in November 2012, the halving pushed the price way above $20. Later next year, continuing with the trend, the price of Bitcoin reached $1100. A 100x price increase in less than a year was monumental.
When is the Bitcoin Halving?
The halving mechanism was planned so that the rewards go down roughly every four years, specifically every 210,000 blocks. The next block reward halving is expected to occur when blocking no. 630,000 has been successfully mined. According to most estimates, 18 May 2020 could be the day the rewards go down. We will see the block reward fall from 12.5 to 6.25 bitcoins on this day.
Below is the schedule by which the halving process is said to be executed.
Why is the Bitcoin Halving Event Crucial?
Bitcoin halving events are essential for traders, miners, and network participants. This is because the halving effectively reduces the number of new bitcoins being generated by the network. Furthermore, following basic economic assumptions, this limit in the supply of new coins could bring about additional demand as there are fewer coins for an increasing number of interested buyers.
But the spectacle doesn’t just end there. Bitcoin has always been the spearhead of the entire crypto market. Some even term Bitcoin as the crypto market’s gateway currency, as more people are susceptible to exploring other “altcoins” after they get into bitcoin. The last halving was nothing different. In 2017, about nine months after the halving event, the entire crypto market saw its more excellent ever run. Looking at Bitcoins’ returns, many pumps were also seen in other cryptocurrencies. Many currencies saw their highest-ever listings because Bitcoin was pushing the market through the sky.
Now that we understand what the halving event means for the market, it is essential to know what it means for other cryptos. We can expect many projects to take advantage of the upcoming 3rd Bitcoin bull run, but some of them will push the hardest.
Effects of Bitcoin Halving on the Crypto Market
The community has an immense debate about the effects Bitcoin halving might have on the entire crypto market. Some experts say that this time around, the impact could be harmful, whereas many believe we should trust the historical trend and brace ourselves for another trip to the moon.
The last bitcoin bull run, which peaked in early 2018, showed signs of an upward trend almost a year after the halving event. So, it is still relatively early to call the shots. But looking at the run, we can see quite a few things happening again. For instance, Ripple, and its native token, XRP, were quite easily the best-performing crypto asset in the historic run. The gains during the bull run were astronomical. According to specific estimates, XRP saw a price increase of 36,000%. Since then, Ripple has journeyed downward to about the same place as before the 2017 bull run.
Similarly, the entire crypto market has shown signs of a downfall. With the recent advent of the Coronavirus and emergency economic packages announced by governments worldwide, it is tough to pinpoint the effects halving might have. But if history plans to repeat itself, we can be assured that the halving, along with the sudden inflow of fiat money supply, could result in another domino effect that brings historical price fluctuations, shadowing even that of the previous halving.