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Bitcoin has completed its third halving, 10 interesting facts worth noting

May 12, 2020
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1. Bitcoin completed its third production halving in its history. At 3:23 on May 12, 2020, the bitcoin block height (that is, the number of blocks) reached 630,000, the third production halving was completed, and thereward per block was reduced from 12.5 bitcoins to 6.25.
 
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The picture shows a block information structure
2. The birth of Bitcoin and the first two production cuts-

  • On January 9, 2009, the first block of Bitcoin (that is, block height 1) was born, rewarding 50 blocks per block

  • 2 On November 28, 012, the height of the Bitcoin block reached 210,000, which was halved for the first time, and the reward per block was reduced from 50 to 25

  • On July 16, 2016, the height of the Bitcoin block reached 420,000, halved for the second time, and the reward per blockchain was reduced from 25 to 12.5
3. Bitcoin production reduction mechanism. Initially, each block has 50 bitcoins rewarded to the miners who keep accounts. For every 210,000 blocks generated, the bitcoin output is halved until the output of a single block approaches zero. Because Bitcoin adjusts the difficulty factor every two weeks based on real-time computing power to make itgenerate a block on average in 10 minutes, it is often said that Bitcoin halves the block reward approximately every 4 years. According to this rule, by 2040, the output of new coins in the block will tend to zero, and Bitcoin will approach the21 million cap. Although the average generation time of blocks is about 10 minutes, the generation time of each block is not fixed. It may be 1 minute or 2 hours, depending on how fast miners solve mathematical puzzles through computing power competition. Therefore, the halving of production every four years is not a halving on a specific date, but a halving after reaching a certain block height.

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4. The impact of bitcoin halving on prices.

  • In November 2012, the price of Bitcoin was halved for the first time at 12.3 USD. After surpassing the 100 USD mark, the price fluctuated sideways between 100-300 USD. It began to rise in mid-October 2013 and reached its highest point of 1175 in early December. The US dollar then fell back to the lowest point of 164 US dollars, and then rose back above 500 US dollars.

  • In July 2016, the price for the second halving was US $ 664. After a 10-month shock, it rose to more than US $ 1300. Then the bull market opened, and in December 2017 it rose to a peak of nearly US $ 20,000. It fluctuated below US $ 10,000, reaching a cycle low of US $ 3155 in December 2018. After this, until today’s halving, most of the time oscillated between 5,000 US dollars and 10,000 US dollars.

  • When the third halving occurred on May 12, 2020, the price of Bitcoin was about $ 8,600.
From the historical data of the past 8 years, the halving of Bitcoin is highly correlated with the price, rising from 12.3 US dollars to 8600 US dollars. But the law of short-term price impact after halving is not clear, and the price fluctuation range is huge . Be careful to participate in short-term and futures contract transactions.
5. The effect of halving the expected price. Since Bitcoin’s halving time is 100% predictable, from the last two halvings in 2016 and 2020,there was a wave of rising prices before thehalving, andthere was a significant drop in the halving near or after. This is in line with the typical short-term market law, “good is all bad”.
6. Can the influence of Bitcoin’s first two halvings on prices be reused? The previous two bitcoin halves have risen in 6-18 months, will this skyrocket after this halving?
Here we should pay special attention to the difference in the impact of this halving on Bitcoin’s “circulation”. In the past 12 years (the block output is 50/25 / 12.5 every 4 years), 90% of the total Bitcoin 21 million has been produced. The impact of this halving on the market circulation has been unable to compare with the previous two In contrast, the impact of the subsequent halving on deflation will be even more negligible. Therefore, the deflation caused by this halving may not be the main factor affecting the price of Bitcoin.
However, weakening the effect of halving deflation does not mean that there is no room for Bitcoin prices to rise. The actual circulation of Bitcoin is much less than nominal. At present, the calculated value of total bitcoin circulation is nearly 18.4 million. In the past two years, more than 7.8 million bitcoins have not been moved, including a large number of bitcoins that cannot be recovered due to the loss of the holder’s key.
7. In addition, halving Bitcoin will bring many additional effects, and its ultimate impact is difficult to judge. The halving has the greatest impact on the profitability of Bitcoin miners, which is equivalent to halving the revenue directly after today, and the cost is a lot. Considering the computing power of the entire Bitcoin network, the latest mining machine computing power and the cost of electricity, it can be calculated that the mining cost of Bitcoin before halving today is between 6000-7000 US dollars.
This means that miners will have a sustainable positive average return at least above this price. After halving, the mining cost will increase on this basis. If the price of Bitcoin cannot be maintained at a high level, and the benefits cannot cover the cost for a long time, there will definitely be a large number of miners who choose to shut down the mining machines. At the same time, the cost of mining is also one of the important supports of bitcoin price, and there is reason to pay attention to the change of computing power of the entire network after halving.
8. Pay attention to the use value of Bitcoin. The latest value of the computing power of the entire Bitcoin network is 121.64EH / s, and the annual electricity consumption exceeds the national electricity consumption in Finland (Finland electricity consumption ranks 35th in the world), and the daily electricity cost for mining is close to hundreds of millions of yuan. Miners pay such a large cost to mine, and they must sell the mined coins from time to time to maintain cash flow. This is only a matter of time.
In the case that 90% of bitcoin has been dug, the application scenarios of bitcoin must keep up with it, otherwise it may still be reduced to drumming. In recent years, the mainstream recognition of Bitcoin is improving, and the application scenarios are also substantially expanding. Its underlying blockchain technology and sophisticated system design have also been researched and applied by more and more countries and enterprises. However, it is not easy to say whether the level of consensus and use value have kept up with the current market price.
9. The possible “death spiral” of Bitcoin. An idea about the crash of Bitcoin is called the “death spiral”. The ever-decreasing bitcoin price makes mining unprofitable. As a result, miners withdraw from mining, and the computing power of the entire network declines. The consensus basis weakens, which further leads to Prices fell and more miners were forced to shut down. This is a possible “strengthening circuit”.
10. Although the impact of bitcoin halving on price and participant earnings is difficult to determine, it is a very ingenious self-regulating mechanism for bitcoin’s own system.
The income of miners fluctuates around the economic equilibrium point, and the overall reward they receive is roughly equal to their hardware and electricity costs in the long run. The reason is: if a miner continues to lose money, he will stop mining; conversely, if the hardware and electricity costs are fixed, the mining profit is high, then more mining equipment will join the network. The increase in computing power will increase the difficulty, and the expected return of each miner will decrease.
In the most extreme case, it is assumed that after halving, some miners shut down because they cannot afford the mining cost, the computing power of the entire network decreases, the price of Bitcoin drops, and more miners withdraw. When the bitcoin price drops to the lowest market consensus level, the mining revenue will exceed the mining cost at this time, and it will attract more people to start the mining, the consensus will be strengthened, and the price will rise. Moreover, once an extreme situation occurs, the miners who are the first to shut down will be miners with backward mining machines and high power costs, which is equivalent to a self-cleaning of the Bitcoin system and optimized efficiency.
Therefore, no matter how the price, computing power and output change, Bitcoin’s operating mechanism ensures its great survival flexibility.
 
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Regardless of whether the market is fanatical or sluggish, Bitcoin is indeed a simple and robust token model that has been proven by time and is highly robust. And halving deflation is undoubtedly one of the keys in its system design.
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