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8 days to go until the Bitcoin halving

In less than 8 days, the third halving will occur on the Bitcoin blockchain, currently scheduled for May 12.

When that happens, miners’ rewards for creating new blocks will be slashed in half—down to 6.25 BTC from the current 12.5 BTC per block. Consequently, this will also reduce the rate at which new coins are minted, slowing inflation and limiting the new supply.

The next halving of Bitcoin will take place approximately at 13:30 UTC on May 12 on the block #630,000.

Over the last decade, Bitcoin’s halving occurred roughly once in four years—or once every 210,000 blocks—and will continue until the very last coin has been minted (approximately by 2140).

Previously, Bitcoin has already undergone two halvings. On November 28, 2012, the block rewards were reduced from 50 BTC to 25 BTC. Then, in July 2016, down to 12.5 BTC.

Additionally, after the halving, the annual inflation of Bitcoin will go from 3.65% to 1.8%—approximately half of the global annual inflation rate, according to Quantum Economics founder Mati Greenspan.

Notably, the halving will make Bitcoin even scarcer, as there is a hard limit of 21 million coins that could ever be mined—and a significant portion of BTC has been lost forever by now.

Hash Rate as a Clue to What Will Happen

The hash rate is an indicator that’s worth watching in the period around a halving. A higher hash rate indicates more computing power in the network — or, in other words, high participation from miners.

Hash rates around previous halvings tended to show similar trends to price. For example, in the 2016 halving, the hash rate showed a steeper increase a year later, indicating that more miners were attracted by the increase in Bitcoin’s price.

However, from the chart above, it’s evident that there was no significant drop off in the hash rate after the 2016 halving. In fact, the hash rate stayed steady immediately post halving despite the obvious drop in mining profitability.

Mining rewards are only one component of overall mining profitability. Transaction fees are another way that miners generate income, and looking at transaction fees around the last halving, there was also no significant change following the event. Like price and hash rate, transaction fees went up 11 months after the last mining event in 2016.

Lennix Lai, the director of financial markets at OKEx, said miners might be put off by the prospect of decreasing rewards and only earning income from transaction fees.

He said:

“With the expected cut in block rewards, I think the industry would start by questioning the basic assumption of halving — whether or not the transaction fees alone would be sufficient to sustain the entire Bitcoin network.”

What about the price?

Looking at historic data, it’s almost impossible to predict what effect the next halving will have on the price of Bitcoin. Currently, we’ve seen a huge pump as the coin surged from around $7,500 to roughly $9,400 in a matter of days. But the price has headed back down to $8,750.

Catherine Coley, CEO of Binance.US, recently told Decrypt the halving is a “momentous occasion,” but she cautioned that the effects may not immediately make themselves apparent. “It could result in nothing, or could result in longer-tail adoption and a rally out of that,” Coley told Decrypt. “We saw in 2016 that the halving itself was not an instantaneous reaction, but 18 months later we had the largest rally we’ve seen.”

Some crypto analysts say that the current upward trend is the direct result of the forthcoming halving, as people are trying to buy extra BTC in the last moment before its supply drops.

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