Already in mid-May, another very important event will take place for the cryptocurrency market and the entire network and cryptocurrency miners. We didn't write much about the cryptocurrency market in our comments. However, halving is an unusual event.
What is halving and what are the consequences? Digital miners are responsible for the supply of bitcoin, who devote the computing power of their devices to the functioning of the entire network. For this, they receive remuneration in BTC. This pay comes to them every 10 minutes with the appearance of a new block in the blockchain (bitcoin blockchain). In the beginning, miners received 50 BTC per block and on average every four years, this value drops by half. This is halving, i.e. a decrease in remuneration for the excavated block. It will fall by half to zero, which may occur in 2140. In May 2020, the salary will fall from 12.5 BTC to 6.25 BTC.
This, in turn, will reduce bitcoin supply, and unprofitable miners will have to complete the cryptocurrency mining process. Due to this phenomenon, bitcoin is a deflationary currency, in contrast to traditional currencies, whose supply is constantly increasing. In turn, the BTC supply is systematically falling. Nowadays, the gigantic increase in the supply of dollars, euros and other currencies bitcoin and other cryptocurrencies may become a carrier of the value of money over time. It could be said that BTC is gold 2.0, the nature of which may be used as asset protecting against potential future inflation.
That is why this year the phenomenon of halving is very popular, which is also indicated by statistics in search engines. Looking at the past, which does not have to be an indicator for the future, of course, halving was usually followed by months of BTC price increases. The main of cryptocurrencies could also be followed by the others: ETH, LTC or XRP. Halving by itself did not immediately generate a huge change in quotations, but it did contribute to initiating a long-term process. Will this be the case this time? We still have to wait with the answer to this question, but the event is definitely noteworthy.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
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