Bitcoin had its third halving in May, a rare phenomenon of cryptocurrency structure that happens only once every four years. What happens is that bitcoins, as time progresses, are increasingly difficult to obtain. In other words, cryptocurrency miners will receive less and less rewards for their work. But we go in parts.
Bitcoin, unlike fiat money, is not freely printed according to the needs of central banks. In Bitcoin there is no central bank. Everything works in the Blockchain, a decentralized network that obeys mathematical algorithms to guarantee data storage.
In the case of Bitcoin, it was defined that, in order to keep the network active, incentives were given -in the form of cryptocurrencies- to the people who ceded the processing power of their computers, in order to validate the transactions of bitcoins, those people are known as miners. Only, unlike normal money, which because it is printed freely tends to exist more and more (and with less value), in the case of Bitcoin this process is controlled.
Bitcoin creator Satoshi Nakamoto defined that there would be only 21 million bitcoins. Currently, there are more than 18 million in circulation. However, it will reach its maximum capacity in the year 2140. Why? Precisely because of halving. This phenomenon causes the amount of cryptocurrencies distributed during mining to be reduced by half, every 4 years. Then, the new cryptocurrencies that will enter the market will be less and less, as the following graph shows.
Until the year 2140, every four years, we will continue to have halvings, which will make the rate of entry of new bitcoins slower and slower. That is why, unlike central banks, which print more and more money and make it less and less valuable, this cryptocurrency tends to be increasingly rare and more valuable. For this reason, many people choose to buy cryptocurrencies, hoping that this asset will gain value as it becomes progressively more precious.
The days before Halving
The expectation, as always, was tremendous in relation to the event. Most investors expected price movements at that time, as market analysts themselves always anticipate volatility in times of halving, because it is possible to identify positive correlations with the rise in the price of the cryptocurrency. Proof of that expectation were searches on Google throughout the last year, for the expression "Bitcoin halving", as shown in the graph below.
A little in the image of interest in relation to this event, the price of bitcoin also rose in the days that preceded it. In February, bitcoin reached a peak in the order of USD 10.300 and everything indicated that it would continue to rise, but the impact of the crisis of the new coronavirus It caused the cryptocurrency price to drop in half in a few days. However, in the week preceding the halving, bitcoin revalued again and approached $ 10.000, raising expectations around the event.
The revaluation was not only higher because, just like 4 years ago, bitcoin again registered a slight drop of 11%, immediately in the days before the event.
So how was the Halving Bitcoin?
El halving of Bitcoin occurred on May 11, 2020. Keep in mind that this was only the third halving in the history of Bitcoin, at a time when about 3 million bitcoins out of a total of 21 million are still to be mined.
The rewards obtained with Bitcoin mining were reduced from 12,5 BTC per mined block to 6,25 BTC, making cryptocurrency mining less lucrative.
As many analysts anticipated, the bitcoin price rose in the days preceding the halving, exceeding USD 10.000 again.
The historical behavior of halvings The above shows an upward trend after the event, but it is uncertain that the behavior will repeat itself. However, the trajectory after the last halving It has been encouraging, especially if we consider that the world is going through a period of uncertainty, due to the Covid-19 crisis.