What is Bitcoin Halving Day? Will the Price Continue to Surge?

What is the Bitcoin halving?

A ghost, the ghost of halving, is wandering in the world of Bitcoin. All forces in the Bitcoin world, mining machine manufacturers, mining pools and miners, practitioners and brick movers, speculators and diehards, are waiting for this inevitable arrival - the halving of Bitcoin production. What is halving?

Mr. Li Daokui, a famous economist in my country, once said: "I suddenly found a god who suddenly had twice the current total amount of Bitcoin. Wouldn't the Bitcoin in your hands be worthless?"

So halving means that Bitcoin

Did it become half in an instant?

Of course not!

Regarding the number of Bitcoins, everyone who knows a little bit about Bitcoin knows a saying: the total amount is 21 million, and it is halved every four years. But why is this the case? Let's talk about the issuance mechanism of Bitcoin:

The Bitcoin network is equivalent to a large ledger. In the Bitcoin system, each block is a page of the ledger. Blocks are connected together to record all legal transactions that have occurred in the system. Each block has an increasing number, which is the so-called block height. Every time a miner successfully packs a block, he will receive a certain amount of Bitcoin, which is the Bitcoin issuance mechanism.

In Satoshi Nakamoto's design, the block reward will be halved every time 210,000 blocks are mined: 50 BTC per block for blocks 1-210,000, 25 BTC per block for blocks 210,001-420,000, and so on.

It is easy to see that this is a geometric sequence with a common ratio of 0.5, and the sum of this sequence is 210000×50 (1+0.5+0.25+0.125+……) = 21 million

How about it? My math is pretty good, right?

This is the origin of the total number of Bitcoins 21 million

In the Bitcoin system, it takes about ten minutes to pack a block. In other words, in theory, the issuance rate of new coins will be halved every 2.1 million minutes, which is about 3.995 years in years (clicking on the calculator).

This is the origin of the saying "halving every four years" that is popular in the industry. As the computing power of Bitcoin has been increasing rapidly, the average block time of the system is slightly less than 10 minutes, so the actual halving time is even shorter than the theoretical value of 3.995.

This is what happened in history. We know that the genesis block of Bitcoin was mined on January 3, 2009, and the first halving of Bitcoin occurred on November 28, 2012, with a total interval of 1,425 days, or about 3.90 years. This halving is expected to occur on July 9, 2016, with a total interval of 1,319 days, or about 3.61 years (which indirectly shows how rapidly the computing power increased during this period).

At the moment when the author writes this article, the 419120th block, 15728000 bitcoins have been mined, and there are 880 blocks left before the next halving.

Bitcoin is not affected by external human factors and will not suddenly double as Mr. Li Daokui worries. This halving is something that has been clear since the birth of Bitcoin. Simply put, the speed of generating new Bitcoin coins will be reduced by half in a few days.

What is the impact of halving?

Many people say that if the output is halved, the price will double. There is no time to explain, just get on board.
Some people also said, don’t forget that this round of launch started from 1500, and the double price is 3000, it’s already a bubble, get out of the car quickly. As an innocent spectator who plays with coins, are you confused?

I apologize for not understanding the logic of those who discuss price reduction based on halving.

I am not saying that halving has no impact on the price. In pure theoretical calculation, if the monthly new Bitcoin demand and Bitcoin new coin production are equal, the Bitcoin price will go sideways; if the demand is less than the production, the price will fall, and if the demand is greater than the production, the price will rise. So if it is in an upward channel now and the production is halved, the price will rise faster.

Through the above Bitcoin issuance mechanism, we already know that Bitcoin issuance is an open and transparent matter. In this context, all participants in the Bitcoin system can make predictions and responses to this variable, which actually weakens the impact of output on price.

What does this mean? Let’s sort it out:

The price of a commodity is determined by its value, and the price is affected by demand and supply. The price of Bitcoin comes from people's recognition of its own value. The more people and institutions recognize the value of Bitcoin, the higher its price will be. The supply and demand relationship of Bitcoin will have a short-term impact on its price.

During Bitcoin’s first halving cycle, when Bitcoin’s impact was not as widespread as it is today, that is, from 2009 to 2012, the price of Bitcoin rose from zero to a high of $30. What drove the price up was people’s recognition of Bitcoin’s value, not changes in supply.

Let's learn from history and see what happened during the last halving. In the half month before and after the last halving, the highest and lowest points of Bitcoin prices were 12.67 and 11.78 respectively, which was in a sideways state. Before this year's Bitcoin halving, market sentiment surged, a large number of players entered the market, and affected by the risk aversion of Brexit, Bitcoin has experienced three rounds of surges since May.

Therefore, the editor believes that it is a great opportunity to use the halving as an opportunity to popularize Bitcoin to outsiders. If there are speculators who want to take advantage of the opportunity to hype up the price and make a profit, it is also great as long as you are happy.

As a spectator who has hoarded a few coins, just continue to watch.

As for Bitcoin miners, I am afraid they are not in the mood to continue to eat melons. Under the pressure of halving, miners have to continue to work hard to keep their profits. The economics of miners is also very simple. The cost is various electricity costs, labor and various operating expenses, and the income is the Bitcoin reward obtained × Bitcoin market price.

The halving of Bitcoin production means that the Bitcoin reward for miners is cut in half, which also means that the income is cut in half at that specific moment. A direct consequence of this is that some less efficient mining tools and miners will be eliminated.

We can once again learn from history. The last time Bitcoin was halved, about 20% of the computing power was eliminated. After that, more efficient mining tools were put into the Bitcoin system, and the computing power quickly recovered and continued to grow rapidly. The impact of this halving on Bitcoin mining will probably follow the same logic.

There is probably no other impact. Let us look forward to the halving day on July 9th!

The future is here!

July 8 (one day before the halving)

"2014-2016 Global Bitcoin Development Report Press Conference" is about to be held!

Tsinghua University PBC School of Finance's Internet Finance Laboratory, Sina Technology and Huobi jointly released the first global Bitcoin development report!

When Bitcoin is halved,
Witness the future of Bitcoin and blockchain together!