Bitcoin halving took place on May 12 at 01:14 GMT! It is no secret that the market capitalization of the Patriarch of cryptocurrency exceeds the total capitalization of all the other blockchain ecosystems. That's why any significant event in Satoshi Nakamoto's project, let alone halving of Bitcoin 2020, attracts the attention of the Blockchain community.
Many cryptoentusists have high hopes for this coin. In their view, halving will be a catalyst for digital gold prices, which will have a positive impact on the crypto industry. In this article we will find out what is bitcoin halving, how does it influence the market as well as what it means for traders and how to make the most out of it.
What is the bitcoin halving?
Bitcoin halving is the halving of a reward for a signed block. According to the implemented program, halving occurs every 210 thousand blocks. It takes about four years to build the latter.
Halving is taking place for the third time already. The dynamics are such that with each halving the miners lose half the price per block. Thus, initially, it was 50 BTC, and now it is fixed at 6.25 BTC.
Once there were enough resources of a dual-core processor to service a bitcoin network, then video cards were plugged in. Soon it was merged into mining farms and, finally, integrated circuit devices (ASIC) appeared. Information about the transfers verified by the miners is added to the block, and only after it is filled in and the hash signature is found, the miner will receive its crypto processes. The mining process is similar to running, only one athlete comes to the finish line first as a result of the final jerk (finds the hash signature of the block) and receives an award. Extracting bitcoins is a profitable business and the competition among the miners is very serious. In recent years, BTC mining has been put on an industrial basis and most of the coins are mined by large companies.
The halving of payments sifts out the most ineffective mining farms, which, as the history of the first cryptocurrency shows, positively affects its value in the long run. Central banks can print as many dollars or euros as they want. The Bitcoin software code has a maximum production limit of 21 million coins. Halving protects bitcoin from inflation, making it look more like gold than regular money. It is believed that the last coin can be mined in 2140.
When is the bitcoin halving and what will happen?
The third halving of Bitcoin took place. On Tuesday night, May 12, 2020, the award for Bitcoin mining was reduced by 2 times. Both previous halvings (in 2012 and 2016) were accompanied by a subsequent price increase. It seemed logical, because the supply of a cryptocurrency in this case decreases, and the demand continued to grow then.
Naturally, everybody tried to get their blocks up to X hour, which increased the difficulty of mining. The price took off at the same time. On May 9, it touched the $10 thousand mark, after which it collapsed down at fairly high trading volumes.
The halving of bitcoin rewards will lead to lower profitability of extraction, however, most miners are sure that it will not last long. Of course, outdated ASICs will have to be disposed of, but the latest models will still be profitable. Halving is embedded in BTC's software code and serious miners were aware of the date of its occurrence.
Cryptocurrency production is a long-term investment, the demand for it will only increase over time and this is facilitated by halving bitcoin. The chart for the last 8 years shows its usefulness for the peer-to-peer network. If halving had not been carried out, the miners would have already produced all the digital gold, which inevitably led to market saturation.
Halving the award for a block in a bitcoin network is an important event and its consequences are significant and poorly predictable. The only thing you shouldn't do for sure is panic. If the halvings of 2012 and 2016 did not lead to a disaster, all the more so now it will not happen. Even the most negative scenario around the BTC halving will not lead to the death of the crypto industry.
Most likely, Bitcoin will stabilize for a while and then grow slowly and confidently. With new peaks ahead of them, Satoshi Nakamoto's project will survive the era of paper money dominance and take its place in the new financial and economic system.
How will the price react to the bitcoin halving?
To assess the impact of halving 2020 on the further development of Bitcoin, it is necessary to analyze the price changes for the asset in the previous two times.
Before the decline in 2012, the price per coin was $12.12. At the same time, it rose to $988.63 (+8057%) for the year. By the time of the second halving in 2016, the price per BTC was $657.56. In July 2017, it rose to $2,525 (+283%). In December of the same year, the Bitcoin price reached a historic high of $19,783 per coin. Thus, after the second halving bitcoins, the value of the asset increased by 2908% in 1.5 years.
Despite the high volatility, overall, the price of bitcoin rose after each halving. This is primarily due to:
a reduction in inflation;
the psychological effect of limited supply.
As for the changes after halving on May 12, 2020, it is not yet possible to say with certainty what awaits bitcoin in the future. Many factors affect the value of an asset. For example, now market demand is largely formed by the economic crisis and high inflation in fiat currencies.
As can be seen in the chart below, since February 2020 the price of Bitcoin has fluctuated a lot. A sharp decline occurred in mid-March when the value of the asset fell from $8,300 to $4,300. After that, the price gradually rose and in anticipation of the third halving was at $10,000. On May 12 it fell to $8,900. After the halving, the asset value started to rise gradually again. As of June 30, 2020, the price is $9,158. Thus, if we estimate the price changes since halving, it has increased by 2.9%.
Even though in the first 2 days after reducing the production reward for the new block to 6.25 BTC, a decrease in volatility was expected, now the price is subject to constant fluctuations.
After the first halving bitcoins in 2012, the volatility decreased at first and then increased significantly. The same trend was observed after the second halving: the decline occurred before the sharp rise in the price in December 2017. As for the impact of the third halving, so far we have seen an increase in the volatility level. If before May 12 the value was 3.05%, then as of June 30 this figure is 8%.
Many analysts are confident that, as after the first two halvings in 2012 and 2016, the asset value will grow. Against the backdrop of the global economic crisis due to quarantine caused by the COVID-19 pandemic and instability of the oil market interest to cryptocurrencies will increase. Bitcoin prices are predicted to rise to $50,000 by the end of the year. Some analysts are convinced that by 2022-2023 it will reach $250,000.
How to trade the bitcoin halving
Once you decided to take advantage of bitcoin halving you have two options: either trading bitcoin CFD with a Forex broker or buying actual bitcoins through a cryptocurrency exchange, for example, Coinbase or Bitstamp. Both variants have their pros and cons, let`s have a look at them.
First off, trading bitcoin CFD (Contract for difference) can be viewed as the best one of the two due to several reasons:
CFD allows you to place both short (anticipating that the price of the asset will go down) and long (anticipating that the price of the asset will go up) positions, i.e. you can make money even if the price of the digital currency goes down;
CFD is a short-term investment (mostly), in such a way you will enjoy your profits sooner than if it was bitcoin in your crypto wallet;
CFD trading with a forex broker allows you to trade a higher amount with the help of leverage. Today brokers offer leverage for cryptocurrencies of 1:5, which means that with the deposit of $1000 you will be able to place orders for the amount of $5000.
Choosing to work with the broker you can trade not only bitcoin but other digital currencies too, e.g., Ethereum, Ripple, Litecoin. This feature is very helpful because they are all correlating with the bitcoin.
With a reliable broker, you can be sure that your funds are secure and being kept on the segregated account.
The only disadvantage of this type of trading is the possibility of working with a forex scam broker. This can be overcome easily if you know how to choose a broker and what aspects to pay attention to.
Secondly, if you want to trade bitcoin halving through the exchange, note that for that you will need a bitcoin wallet. Here comes the first drawback of this type of trading because you will have to find a reliable website that can ensure the safety of your account. For your information, one of the China-based exchange was hacked in 2018.
Needless to say that it is much more complicated than it seems and requires some time and basic knowledge of the market. First of all, you need to keep in mind the risks associated with
BTC - you can not only make a profit but also lose all the money invested. Typically, in fundamental analysis, the highs and lows of bitcoins follow the latest developments in the industry. So the best time to buy is a positive trend or preconditions for it. Professional market players see the advantages of falling rates as well. This can be a great opportunity to buy cheaply now and sell it expensively a little later. In this area, one thing remains unchanged: prices will always rise and fall.
You can try trading bitcoin CFDs without any risk. Create a demo account, place a couple of trades, and see yourself how easy it is. Once you are satisfied and feel like you are ready to make real money switch to real and let bitcoin halving make you happy
Trading the bitcoin halving in MetaTrader 4
In order to start trading bitcoin halving on MetaTrader 4 launch the trading terminal and look for the cryptocurrencies in the list of symbols. If you haven`t use the terminal before, follow these instructions;
Run the PaxForex MetaTrader 4;
Navigate the Market Watch tab on the right top of the screen or just use the hotkey combination Ctrl+M;
Press the right button of the mouse and choose Symbols from the drop-down list or just use the hotkey combination Ctrl+U;
Now you will see the list of the available markets to trade on, including shares, Forex, metals, and cryptocurrencies.
For the assets needed to be reflected in the Market Watch by default, choose an asset or a category, cryptocurrencies in our case, and press Show Symbol and ok.
If you want to monitor or analyze a chart of the asset of your choice, right-click on the symbol and choose Show Chart.
Position can be opened in several ways, choose the one you like:
Press New Order on the toolbar;
In the Market Watch window right-click the asset you are willing to trade and from the menu appeared choose New Order. Alternatively, you can just double-click on the asset;
In the main menu go to Service and then choose New Order;
Right-click on the chart of the asset chosen and from the menu appeared click New Order.
Once you have a New Order Window shown set here the trading volume, set Stop Loss and Take Profit and click on BUY or SELL depending on the direction you expecting the price to move.
Bitcoin halving 2020 analysis
What happens after halving bitcoins? Will this event lead to another bullish cycle or, conversely, weaken the BTC ecosystem.
Famous cryptanalyst Osato Evan-Nomayo believes that the Bitcoin rate will reach a new historic high of $20,000 this year 2020. His forecast is based on historical facts. Bitcoin has already been halved twice and after each date, the coin price has only increased.
CEO of Brave New Coin Fran Striner is even more optimistic. According to his forecast, digital gold will be sold at $200,000 per coin by the end of 2020. Analysts at Brave New Coin refer to the inverse relationship between supply and demand. Bitcoin is becoming more and more popular and the decline in the production of coins will lead to their deficit and rising value.
Of course, no one can make 100% accurate predictions, but the general trend in the market of digital currencies indicates that the bitcoin is strengthening. No alternative crypto coin can compete with bitcoin.
To get the whole picture of the bitcoin behavior after the halving let`s refer to the technical side of the asset.
Looking at the daily chart, it is easier to see that Bitcoin continues to apply pressure to $10,000, with around four concerted attempts to break it, whereas price lows are generally higher lows.
As such, this is the longest consolidation for Bitcoin below $10,000 and is one that shares characteristics of a bullish consolidation triangle, which — if it played out — would imply a move to the upside toward $12,000.
Should the triangle break to the downside, there are the 200-day and 100-day moving averages, both also in the key support area just north of $8,000. As it stands, the 50-day MA is supporting the price, having been tested multiple times this week.
Overall, from a technical point of view, the market remains in a bullish posture, above all key MAs but is consolidating below resistance. Turn $10,500 into support and $12,000 and beyond becomes a very real possibility. But, as mentioned, shorter-term price action remains largely at the mercy of the wider economy — particularly while Bitcoin consolidates on low volume.
The 2020 halving has already had a noticeable impact on Bitcoin much like the halvings before it, both of which preceded considerable appreciation in BTC’s price.
Meanwhile, Bitcoin continues to follow certain patterns such as a noticeable correlation in value to traditional markets and geopolitical events.
The latest Bitcoin halving has also seen record media attention compared to 2016, as well as unprecedented institutional interest and volumes. Notably, Paul Tudor Jones revealed right around the time of the halving bitcoins that his fund had made a small 1%–2% size allocation to Bitcoin.
Growing institutional interest and new funds entering the Bitcoin market are a strong bullish sign for the cryptocurrency, and 2020 is shaping up to be a pivotal year for Bitcoin — which is on its way to becoming a new standalone asset class.
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