Market Extra: What is the bitcoin halving and which day does it happen?

Market Extra

The bitcoin phenomenon is also known as the ‘halvening’

A pile of coins representing Bitcoin cryptocurrency sit grouped together in the U.K.


Bloomberg News

What is the halving or halvening?

The event is known as the “halving” or “halvening,” and occurs every four years, where the rewards for those who support bitcoin are slashed, quite literally, in half.

So-called bitcoin miners expend tremendous amounts of computing power to verify transactions and link them, digitally into a block, hence the term blockchain. Miners on the blockchain — the digital ledger technology that underpins the currency — receive a precise number of bitcoins for their efforts in solving a complex puzzle.

That computing effort is at the very heart of the digital currency that was created 11 years ago by a person, or persons, identifying themselves as Satoshi Nakamoto.

Interest in the event from average folks has been rising measured by search traffic on Google:

What will the reward for bitcoin miners be?

This halving will bring the reward to 6.25 bitcoins.

Originally, those mining for bitcoin
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-0.22%

were rewarded with 50 coins every 10 minutes, but that reward was cut in half to 25 bitcoins in 2012 and to 12.5 in 2016.

When will the halving occur?

The third halving for bitcoin was expected to occur between May 11 and May 12, with some sites pointing to halvings taking place in about four hours, as of midday Monday in New York.

What impact will the halving have on price?

The halving phenomenon, which was written by Satoshi into the software protocol of bitcoin from its genesis, is intended to constrict supply of the digital asset. No more bitcoins will be created after the total number of bitcoin in existence hits 21 million. Currently, there are 18.4 million bitcoins in circulation, according to data site CoinMarketCap.

Tightening supply in bitcoin creates a level of scarcity that in theory should push prices higher, experts in the industry say, who point to past halving events as eventually creating a price floor for bitcoin.

However, CoinDesk reported that options trading in bitcoin showed a 3% chance of a move toward its December 2017 record high at around $20,000, by the end of June, and a 6% chance of a move to record by the end of September.

Currently, bitcoin’s price is $8,954.27, up by about 3%, according to Coindesk.com. Bitcoin prices are up nearly 25% over the past 30-day period, but down 12.5% over the past three months, according to MarketWatch data.

Futures for bitcoin traded on CME Group Inc., were lower on the day by at least 10%, as gauged by the most-active May contract
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-1.70%
,
which expires May 29. It was trading at $8,955.

Bitcoin is up 24% in the year to date as are bitcoin futures. By comparison, gold prices
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-0.05%
,
the asset bitcoin is often compared against, was up 11.5% in the year to date based on the most active contract on Comex. Meanwhile, the Dow Jones Industrial Average
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-0.44%

was down 15.3% so far this year, the S&P 500 index
SPX,
+0.01%

was off 9.5% over the same period and the Nasdaq Composite Index
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+0.77%

was holding on to a 2.2% advance thus far in the year.

What are bitcoin analysts saying?

“What remains clear is that this halving has many more eyes on it than in previous cycles,” in 2012 and 2016, wrote Charles Hayter, co-founder and chief executive at research site CryptoCompare. ‘Search data indicates unprecedented interest in the event and Bitcoin’s blockchain data shows it to be in good health,” he said.

Hayter said that he was viewing the bitcoin halving at this point as “significant,” given the growing worries about the outsize measures of monetary and fiscal stimulus that has been implemented to help limit the damage from lockdown measures in place to slow the spread of COVID-19.

“We are already starting to see flashes of the oncoming depression and rise in isolationism.” he told MarketWatch. “The next phase of emerging market unrest will be an Arab Ppring phase 2 and nonstate issued value transfer mechanisms with censorship resistance will prove their worth for some,” he said.

Bitcoin emerged in the 2007-09 financial crisis.

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