Analysts suggest that the event will be different from the reductions by half occurring in 2016 and 2012. All this takes place amid the coronavirus pandemic, a recession, and the intention of central banks to test digital currencies.
Similarly to the Olympic Games or the Soccer World Cup, the Bitcoin halving is an event that occurs every four years. In this third edition, scheduled to occur around May 13th, some aspects make it different from what happened in 2016 and 2012.
The reduction in the issuance of coins from 12.5 BTC to 6.25 BTC per block mined is transcendental on the Bitcoin network. This event will affect everything, including digital mining itself, cryptocurrency markets, and even the development of applications.
Bitcoin is receiving greater attention from the media with big networks talking about the subject and millions of users consulting the Internet about the Bitcoin halving.
A New Picture
According to a study by the firm CryptoCompare, the current cryptocurrency market is very different from that of 2016. That year, the daily Bitcoin trading volume on exchanges seldom exceeded USD 1 trillion. The figure has recently reached USD 20 trillion.
According to metrics from TokenInsight, the profitability of S9 miners in 2016 went from about USD 20 per day, before the halving, to about USD 8 per day, after the reduction of miners’ incentives by half. Currently, S 17 miners are reportedly generating less than USD 5 per day before the halving, which would eliminate their profitability shortly.
This information suggests that users could progressively disconnect S9 miners as they would become inefficient. Besides, once the reduction in the issuance of coins occurs, there could be a short-term increase in the fees per transaction on the network.
Apart from some internal factors on the network, some other elements could be affecting, somehow, what is happening with BTC and the cryptocurrency market.
The main aspect to take into account is the spread of the coronavirus SARS-CoV-2 and the COVID-19 disease. The international health crisis has already caused more than 3.2 million people to become infected and 235,000 to die, but there is not yet a vaccine against this virus.
Last March 11th, the World Health Organization (WHO) decreed a world pandemic due to the coronavirus. This led to a drop in the price of Bitcoin, which went from about USD 8,000 to below USD 4,000, in less than 24 hours.
This situation has led many countries to completely or partially paralyze their economies, creating low demand for commodities. The previous scenario for Bitcoin also showed an unprecedented situation: negative oil prices for the first time in history.
Besides, many countries are currently testing their digital currency projects. Even Facebook’s Libra has just changed its course with a basket of stablecoins, a few days before the halving.
Amid this economic turbulence, Bitcoin has even shown better performance than gold, with higher profitability so far this year, and facing the first major crisis after its creation in 2008.
Now, a few days until the Bitcoin halving occurs, there is the expectation of what will be the reaction of the markets, how the community will react to this new cryptocurrency mining phase, and most importantly, how this project will develop in the face of a greater adoption in the years to come.
By Alexander Salazar