The Altcoins Sequels of the 2020 Bitcoin Halving
Learn why it matters and what is to be expected with this major Bitcoin event
The halving event of the Bitcoin blockchain is dragging a lot of traction in the past weeks. Around 3 million results show up in Google with the keywords “bitcoin halving 2020” or any similar combination. Thousands of articles have been created, and more is to come during this year.
However, this is not the first time the event occurs, this operation takes place every four years roughly. The update of the algorithm happened in Nov 2012 and Jul 2016. Then, what is exactly the halving event and why is it important? We review the most relevant aspects of the BTC halving in this article.
What is BTC ‘Halving’?
Simply put, at some moment of May 2020, the number of bitcoins (BTC) entering circulation every 10 minutes, what is known as block rewards, will drop by half, i.e. from 12.5 BTC/per mined block to 6.25 BTC p.m.b.
Miners use their computing power to solve complicated math problems to unlock BTC keys, i.e. what is known as mining bitcoin. It’s understandable that they get a reward proportional to their effort, namely, the computing power they dedicate to the task.
The mining prize is the block reward (BTC) distributed within participants in the mining. That block reward will be halved. That’s it. That’s the halving in a nutshell.
What is the Effect in Altcoins?
It’s hard to foresee the future when the tides are outraged. The year 2020 will be long-reminded for the COVID-19 worldwide outbreak and the economic recession this caused. Not to mention the thousands of lives gone due to the pandemic. In this turmoil, trying to estimate what comes next is tricky.
What we know is that the price of BTC went up within time after the previous halvings. However, this rise in BTC price could have been influenced by other factors during the months it lasted. In other words, in the short term, there is a FOMO wave of interest that is beneficial for blockchain projects and top cryptocurrencies alike in random short bursts (i.e. price increases).
In the mid-to-long term, though, the landscape varies. In 2012, it took around 11 months for Bitcoin to have a strong growth in value. Similarly, in 2016 the growing movement was not immediate either. Thus, we could expect a strong movement in the BTC price in 2021. Why? Because of mining restructuring.
Bitcoin and Altcoins
The increasing complexity of the mining operations demands better equipment. For large miners, this is affordable and the updates will occur quickly. However, smaller miners will not afford the new devices timely, their transition to better tech will take months at best.
In conclusion, the new complexity will lead to a new balance among the stronger miners and BTC holders. If one side gathers more BTC, thus making the asset scarcer, the price will rise. On the contrary, massive sales, as happened in Mid April 2020, may dump the price notably.
Disclaimer
At Woonkly, we do not offer investment advice. This post may serve as an analysis of the latest blockchain updates only. Trading or investing in cryptocurrency may result in the complete loss of capital. Seek professional advice and act with caution. Pay special attention to scammers and doubtful schemes, since they are abundant in the crypto world. Stay safe.
Written by César Patiño, PR Manager at Woonkly.
