This “halving,” the third in bitcoin’s 11-year history, has been widely flagged. The previous events fueled huge surges in bitcoin’s market value, but there is a wildcard this time in the form of the coronavirus pandemic, some analysts said.
Bitcoin relies on “mining” computers that validate blocks of transactions by competing to solve mathematical puzzles every 10 minutes. In return, the first miner to solve the puzzle and clear the transaction is rewarded new bitcoins. The technology was designed in such a way that it cuts the reward for miners by half after every 210,000 blocks mined or roughly every four years, a move meant to keep a lid on inflation. That reduction in the rate at which new bitcoin enters the system should theoretically push the price up.
The halving could happen as soon as Monday or Tuesday, with most Bitcoin platforms showing that only about 100 blocks needed to be mined before hitting the halving threshold. The mining reward is currently 12.5 bitcoins per block mined. In this week’s halving, the reward will fall to 6.25 new bitcoins.
In the run-up to this week’s halving, bitcoin had surged nearly 40% since the beginning of the year and climbed more than 85% from its lows. By comparison, the dollar index USD is up 3.3% so far this year. The first halving occurred in November 2012 when the mining reward was reduced from 50 bitcoins to 25, and the second occurred in July 2016 when it was further cut to 12.5 bitcoin. This deflationary event has historically signaled the start of bitcoin’s most dramatic bull runs over a period of several years, although not before a brief sell-off.
The previous two bitcoin halvings propelled rallies of about 10,000% from late 2012 to 2014, and roughly 2,500% from mid-2016 to the currency’s all-time high just shy of $20,000 in December 2017, according to traders. There are only 21 million bitcoins in existence and more than 18 million are already in circulation.
Coronavirus live updates: India records largest single-day jump in cases; South Korea warns of second wave of infections, Reuters, May 11