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2020: A Year of Crypto Halving
Are you ready for one of the most anticipated events in the crypto space this year? Bitcoin halving is just 1 month away! To refresh your memory, here is a quick recap of the history, implications, and ways to trade for this event that happens every four years.
The Global Supply of Bitcoin
From the moment Satoshi Nakamoto created Bitcoin, there are only 21 million bitcoins that can be unlocked in total. Therefore, Bitcoin is a deflationary asset, which is the opposite of fiat currency.
The global supply of bitcoin comes from a process called mining, in which miners validate bitcoin transaction records by solving complex mathematics questions. Once done, bitcoin miners can receive bitcoin rewards.
In the earliest days, miners can get 50 new bitcoins each time they successfully created a block. Approximately, it takes around 10 minutes to produce new bitcoins. As of now, the total supply of BTC sits at around 18 million. About 86% of Bitcoins are minted already. However, the reward is currently 12.5 BTC, due to an event called Bitcoin Halving.
What is Bitcoin Halving?
Bitcoin halving is an event that cuts the number of bitcoin awards to miners by half. It happens once 210,000 blocks are created, which takes around four years. There were two bitcoin halvings in the past. After each halving, miners got 50% less bitcoin every time they produced a block.
Following the pattern in the above chart, you can see that fewer bitcoins will be made over time. At the end of the day, after 21 million bitcoins are unlocked (likely in 2140), the total supply of bitcoin will be tapped out. Therefore, bitcoins deflation creates scarcity, and makes bitcoin more valuable.
How Bitcoin Halving affects BTC price?
Bitcoin halving is an essential event for traders, as history has proved both halving events in the past were followed by a significant bitcoin price surge. Look at the historical statistics of BTC price:
The 1st Bitcoin Halving in 2012
Halving day: $12.35
1 Year Later: $1100
The 2nd Bitcoin Halving in 2016
Halving day: $650.63
1 Year Later: $2634.17
1.5 Year Later: $20,000
To understand the reason behind the Bitcoin price surge, you have to know that the bitcoin price is highly affected by the law of supply and demand. When Bitcoin halving happens, miners receive fewer bitcoin rewards. Thus the amount they can sell to the market decrease. Given a decreased supply, when demand increases or stays the same, the asset price increases.
How to trade for Bitcoin halving
Will BTC price reach another all-time high? This question has stirred up debates among the crypto community, especially after the recent setback in the crypto and global economy market incurred by the global pandemic. If you are not sure whether it’s the right time to buy bitcoin, you can try futures or options trading, which does not require holding the asset. You can make profits by speculating the bitcoin price change.
In futures trading, if you expect an increase in the Bitcoin price, you can enter a long position. If you expect a drop in the bitcoin price, you can enter a short position. We provide up to 100x leverage for you to multiply your gains as well.
You may also consider options trading, a popular hedging and arbitrage tool for professional traders. When you expect the bitcoin price will rise, buy a call option. On the contrary, if you expect the price will drop, buy a put option. If you are feeling a bit confused, our Options Discovery page guides you through different options trading strategies that cater to your needs and risk preferences.
More upcoming halving events
2020 is a year of crypto halving, other than the BTC halving in March, there will be more crypto halving events to come, including Bitcoin Cash (BCH) in April, Dash (DASH) in May, Zcoin (XZC) in September, and Zcash (ZEC) in October.
We can’t wait to see how all these events will play out, and hopefully, it will be a fruitful year for you all. In the meantime, let us know your thoughts on this topic, and leave your comments in the tweet below!
Disclaimer: This material should not be taken as the basis for making investment decisions, nor be construed as a recommendation to engage in investment transactions. Trading digital assets involves significant risk and can result in the loss of your invested capital. You should ensure that you fully understand the risk involved and take into consideration your level of experience, investment objectives and seek independent financial advice if necessary.
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