Despite the market crash of Match, and the ongoing Covid-19 fear that is gripping the global markets, there is still a lot of expectation and hope being pinned on Bitcoin’s halving event which is due to take place next month. The halving will see the number of Bitcoin received for unlocking a new block reduced from 12.5 to 6.25 BTC.
This will have a vast impact on the mining sector for Bitocin as suddenly the mining operation, which runs on fine margins, will be 50 percent less profitable. But the reason for this halving is to keep Bitcoin’s inflation low to non-existent, and to bolster scarcity.
This boost in scarcity as fewer coins enter the circulating market should in effect help Bitcoin’s price rise, and it should lead to better price action — as has been seen historically at other halves.
However, Bitcoiners had a little taste of what a halving can do when one of its forks, Bitcoin Cash, had its first halving. The effect for this BCH chain was less than impressive as the hash rate dropped some 80 percent, vastly weakening the security of the chain,and also not seeing much boost in BCH price.
So, can BTC expect the same fate as BCH post halving, or are the forks too different to see the same action?
Bitcoin bracing itself
Bitcoin’s halving is an exciting time for most Bitcoiners who are expecting scarcity to play a role in bolstering its price, even if miners struggle to keep up. In saying that, Bitcoin has already tested its miner’s capability as the price drop in March saw a fall in hash rate and a decrease in difficulty which may have already shaken out the miners who were operating on too fine a profit margin.
Still, Bitcoin’s miners may even be happy to hold on and mine at a lower or negative profit to accumulate coins as Bitcoin is a store of value and one that is getting ever scarcer, this is why it is worth getting compared to Bitcoin Cash which is not intended to be kept or accumulated.
Analyst Mati Greenspan is however convinced that Bitcoin’s halving will bring far more significant price changes than Bitcoin Cash. He explains that Bitcoin is the ’embodiment’ of scarcity while Bitcoin Cash is a side creation off of Bitcoin.
Market drop a blessing
While the market drop may have shaken out the weaker miners and prepared the chain for its halving, there is more to be positive about following that collapse. It is also seen that the Bitcoin Relative Strength Index is very low, which means Bitcoin is incredibly undersold just a month before its halving.