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What is Bitcoin Halving or Bitcoin Pre-halving? Beginners Guide

What is Bitcoin Halving or Bitcoin Pre-halving? Beginners Guide

Halving and pre-halving are very important events for cryptocurrencies when after the halving the price of a cryptocurrency usually soars. What usually happens during halving? How we can predict the price in the pre-halving stage? In 2020, Bitcoin halving is going to happen; therefore, many investors are keen to know the difference between Pre-halving and Halving.

08 May, 2020, | AtoZ Markets- The third Bitcoin “halving” in history is going to happen in 2020. If you have bought Bitcoin, you should know what may happen to the price after halving to minimize crypto trading risks.

Satoshi Nakamoto first created the Bitcoin along with Blockchain technology. Later on, Bitcoin has become very popular among investors. It created a new section of the financial market and still dominating the overall cryptocurrency investment in the world. The unique transaction system attracts investors as it does not require any third party to hold the currency. Although it makes the traditional financial system questionable, people found a safe and secure place to keep their money without letting other people know about it.

Halving and pre-halving is an essential part of cryptocurrency as the future price often depends on it. As we know, in 2020, the world’s most used cryptocurrency, Bitcoin halving, is going to happen.

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Pre-halving and Halving

Can Bitcoin reach $20,000 again after halving? What other signs we have seen in pre-halving stages? 

Let’s have a look.

What is Halving?

Halving (sometimes named as ‘halvening’) is the event when the reward for mining the new cryptocurrency block is halved. It is a very important event as after a halving, the miner receives a 50% lesser reward for verifying the transaction. The schedule of Bitcoin halving happens in every 210,000 new blocks. The halving of Bitcoin requires four years until the maximum supply of 21 million Bitcoins. On the other hand, for Litecoin, the current block reward is 12.5 coins per block and will decrease to 6.25 coins after halving.

In Bitcoin, the primary block reward was 50 BTC. Later on, after two halvings in 2012 and 2016, the block reward was reduced to 12.5 BTC. Moreover, the current Bitcoin halving in May 2020 will reduce the reward to 6.25 BTC.

Among the Cryptocurrency Industry, the Bitcoin halving is a very significant event for traders and investors as it decreases the earning from Block rewards. This process halts the total supply of new coins so that prices may rise if there is sufficient demand. In months before and after previous halvings, Bitcoin’s price increased massively. In 2020, the same things may happen where bitcoin gained almost $1000 in just a single day. However, the environment of each halving is different, and the demand for cryptocurrency may vary.

Why is the Halving Event Important?

As we know, cryptocurrencies are finite assets, and it takes much time and energy to produce. For example, Bitcoin mining requires a lot of electricity and GPU power, which is comparable to the Gold mining from the mine. The supply of new coins usually reduces after every halving. In the previous Bitcoin halving, this event caused the price to surge.

If the demand for an asset remains the same, and the availability reduces, the price of the asset will increase. It is the law of supply and demand that works for this event. The price rises more with the demand and continues to grow at the same rate.

However, past performance sometimes does not confirm future results. Therefore, Bitcoin might enter the bear market zone at the time of halving and vice versa.

Therefore, only time can tell how the market reacts after the event. Nevertheless, as a trader, it is very crucial to keep knowledge about what may happen after the halving as it is directly associates with the investment.

What Usually Happen After The Halving?

Let’s consider the Bitcoin at the time of the first halving; the entire market capitalization was minimal to be noticed by institutional investors. Later on, after one year, Bitcoin’s price had fallen from $31 to $2. Then the price started to rise in November 2011 and moved higher after halving in 2012. Later on, in November 2013, the price moved to an all-time high of over $1200. However, Bitcoin had another fall at the end of 2013 that lasted until 2015. After eight months before the next halving in July 2016, Bitcoin’s price started to improve again.

During this timeframe, many hedge funds & venture capital companies got involved in the cryptocurrency investment with many retail investors. This involvement of them ultimately forced the Bitcoin price at nearly $20k in December 2017.

Bitcoin Pre- Halving Momentum Soars the Price

Bitcoin pre-halving is the moment before halving. This moment is significant for miners and investors as they wait to see the price soars after halving.

In May 2020, Bitcoin halving is coming. Therefore, the Bitcoin mining industry is thriving to see how it could be a turning point for the industry.

Before Bitcoin halving this year, block rewards have reduced by 50%. Moreover, the Bitcoin network has touched its strongest point ever, considering the mining hash rate.

According to the data compiled by a Bitcoin analytics firm, Glassnode, the average mining hash rate of the Bitcoin blockchain reached 139 exahashes per second (EH/s) on a single day.

Pre-halving and Halving

This increase in the hash rate indicates that there are more than 71,000 new Antminers S9 machines on the Bitcoin network. It is the most popular Bitcoin miner that can each pump out a hash rate of 13.5 TH/s.

The Bitcoin mining industry has gone through a wild ride so far this year. However, Bitcoin recovered from the Crypto Winter of 2018 and reached new all-time highs in hash rate month over month.

Difference between Pre-halving and Halving

Halving (sometimes named as ‘halvening’) is the event when the reward for mining the new cryptocurrency block is halved. It is a very important event as after a halving, the miner receives a 50% lesser reward for verifying the transaction.

On the other hand, pre-halving is the moment just before the halving to start. This moment is very significant for miners and investors as they wait to see the price soars after halving. As we know, the cryptocurrency mining is associated with a lot of costs. Therefore, the halving of reward would affect them negatively as the cost remains the same. Therefore, in every pre-halving moment, the market sentiment expects the price to move higher.

In history, Bitcoin moved higher after every halving. However, if something different happens now, it would affect miners aggressively as their activity would be less profitable than now.

Conclusion

The 2024 bitcoin halving will happen whenever the blockchain reaches a block height number of 840,000. It may lower block rewards generation from 6.25 BTC to 3.125 BTC per 10-minute increment. Furthermore, there are 300,000 blocks to mine before the next halving. Let us review the history and enjoy the price fluctuation that is bound to happen.

Think we have missed something? Let us know in the comment section below!

Disclaimer: The views and opinions expressed in this article are solely those of the author and do not reflect the official policy or position of AtoZ Markets.com, nor should they be attributed to AtoZMarkets.

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