September 26, 2020

How to prepare for bitcoin halving?

How to prepare for bitcoin halving?

Every 4 years (on average every 210 thousand blocks) the award that Bitcoin miners receive for adding a block to the blockchain is halved. Bitcoin halving was created by Satoshi Nakamoto to control inflation.

Since the average block calculation time in the networkis 10 minutes, then 210,000 blocks are calculated for 21,000,000 minutes, or 4 years. The last halving took place during the extraction of block No. 420,000 on July 9, 2016. For block No. 419,999, an award was received in the amount of 25 bitcoins, while block No. 420,000 brought to the miner only 12.5 bitcoins.

One of the most characteristic features of bitcoin is its limited amount.

Mining new coins increases the supply thatin turn, inevitably increases inflation. If the supply grows at the same rate as the number of people using the asset, then the prices remain the same. If the price does not rise as fast as demand, deflation will occur, and previously purchased coins will rise in price.

If demand remains the same, increasing supply theoretically reduces the price. This means that if demand remained constant, the price would have to decline more slowly after halving.

It is generally agreed that supply reductionincreases the price. The so-called “stock-to-flow ratio” leaves no doubt that there is a connection between block rewarding halving and rising price. This point of view is rather unilaterally presented in the media, which, of course, increases demand, since everyone wants to profit from an allegedly safe price increase.

An important indicator for bitcoin halving will befuture change in Litecoin price. If altcoin continues to grow after halving, it will fuel a stir around the bitcoin halving. The decline in LTC prices or insufficient growth can shake the collective belief in the theory of "stock to flow", which can nullify the whole hype.

At the time of the last halving, the BTC price fordidn't really hesitate. The network remained stable. The overall hash rate remained unchanged. This suggests that the miners did not turn off their devices due to a decrease in rewards, as many assumed.

Now you understand that halving is not a reason for panic. You can accurately track the date of the next halving using numerous online services.

According to the materials