Here’s why bitcoin’s ‘halving’ doesn’t mean it will push prices higher
Interest in next month’s “bitcoin halving” is growing as the event draws near, but there’s no guarantee prices will rise.
Since 2016, each bitcoin block mined has returned 12.5 BTC coins but around mid-May it will fall to 6.25.
This will happen exactly when the network hits its 630,000th block. The precise date is difficult to tell in advance because the time it takes to generate new blocks varies.
It is anticipated that bitcoin prices will rise, because of natural supply and demand laws as well as precedent.
The most recent bitcoin halving in 2016 began a run which led to the cryptocurrency hitting an all-time high in November 2017. However, some crypto commentators say that may not be the case this time around.
One of bitcoin’s biggest critics, US money manager Peter Schiff, thinks the halving event will be a wakeup call for bitcoin advocates.
Trying to explain the concept of money to a #Bitcoin hodler is like banging your head against a wall. These guys are about to learn a very expensive lesson in economics and gain a new appreciation for the age old saying "easy come, easy go."
— Peter Schiff (@PeterSchiff) April 13, 2020
In a series of tweets earlier this month, Schiff argued that people accumulating bitcoin in anticipation of a price rise would quickly sell if this did not materialise.
No matter what happens to the price of bitcoin, mining will be less profitable considering the reward will be halved.
While a substantial bitcoin price rise could cancel out diminished rewards, a falling price would hurt those mining it as they will struggle to recoup their operating costs.
In light of the uncertainty, bitcoin miners have been upgrading their machines to cut costs.
Bitcoin mining device maker MicroBT recently unveiled hardware that can hash 100 terahashes per second when typical devices have power of only 12 per second. Its hardware also now has a 12 month warranty, up from 6 months previously.
Rival Ebang International Holdings, is seeking to raise $US100m ($155m) as part of a US IPO and it too is seeking to ramp-up production if its own devices.
Ebang said a drop in the bitcoin price was a big risk to its IPO. This is Ebang’s second attempt to go public after an attempt to list in Hong Kong in 2018, a horror year for cryptocurrencies, failed.