To date there are only three weeks lefthalving di Bitcoin, and with this critical event that is now upon us, the first cryptocurrency asset by market capitalization is facing a particularly crucial point for its history, which could shape the future of the asset in the near short and long term.
But what exactly does halving mean, and why do cryptocurrency investors expect the event to be so strongly bullish?
What is halving and why does it impact Bitcoin price?
Il Bitcoin operation provides that every transaction that takes place on the cryptocurrency is validated by the same network that supports the project, without therefore the need for a central authority.
This particular process involves the use of high technology machinery designed to obtain the greatest possible quantity of hash at low cost, using it to solve complex mathematical equations. The miner or pool of mining, to solve all the equations necessary for this activity, unlock a reward of 12,5 BTC.
Well, in three weeks this reward will drop to just 6,25 BTC. And, considering that it is the third halving of Bitcoin history, it may be helpful to try to understand what happened in the past.
What happened in the halving background
Every halving in the past has triggered a strong bull run in Bitcoin. The idea is in fact that if the reward that BTC miners receive is halved, they immediately increase production costs. Miners will stop selling at a loss, which should support the price of Bitcoins. And that's why, every time in the past, the price of Bitcoin has risen exponentially following the event.
The current context weighs
However, it is not said that this time things must necessarily go in the same direction. Market sentiment is at its lowest after last month's record slump that brought the price of the major digital currency to less than $ 4.000. The pandemic of coronavirus it made investors too fearful to take a risk with the cryptocurrency market, even with halving so close.
Of course, Bitcoin prices then recovered, trying to regain lost ground. However, it is not the minimum peak reached a few weeks ago that has not disappeared, but the question mark on the effect that will arise from the halving ...