April 15, 2020 / Beginners

Halving: What Does Await Bitcoin In A Month

halving btc

Bitcoin halving is expected on May 13. This day, the block will be mined, after which the reward of miners to reduce from 12.5 BTC to 6.25 BTC. At first glance, this a technical event for the crypto community is almost a mystical one. Various theories are being built. The good theories explain why the price of Bitcoin will go up, and bad ones predict the collapse of the network.

In this article, we will analyze what happens during the halving based on the example of the Bitcoin Cash and Bitcoin SV halvings. How will this affect miners, what to expect, and why Bitcoin halving will be unlike all previous ones we explain in this article.

BCH And BSV

Block # 630,000 was mined on the Bitcoin Cash network on April 8.

We’ll explain immediately that the normal time of the mining block of Bitcoin and its clones is 10 minutes. At the same time, if there are more miners in the network the hash rate increases and the time to mone one block decreases.
Therefore, there is such a thing as difficulty. It is recalculated automatically through the set number of blocks and makes miners mine one block again in 10 minutes.

When miners leave the network, their remaining comrades need more than 10 minutes to mine one block, and this will continue until the difficulty of the network decreases.

When the Bitcoin Cash halving occurred, the miners tried for about an hour and a half to get block number # 630 001. This was the first one with a reward of only 6.25 BCH.

Then the network was unstable for about a day and a half and the delays between the blocks were 40 minutes. To date, they mine blocks every three minutes, although there are protracted downtimes:

bch mining

The answer to this behavior of the Bitcoin Cash blockchain was that after the halving, the miners together went in search of greener pastures to the Bitcoin network:

bch chart

Hash rate decreased by 80% from 4 EH / s to 0.7 EH / s. The hash rate of the Bitcoin Cash network recovered quite well, but then went down again after recalculating the difficulty. Now the miners are clearly looking for their middle ground. Will it in the region of 2 EH / s or will go even lower we will find out in the next month. In the meantime, we can say that a decrease in the block reward by half has actually led to a similar decrease in the hash rate.

The Bitcoin SV halving took place on April 10, and unlike Bitcoin Cash, miners were able to mine the first block with a halved award in just 29 minutes.

Then they started having the same problems as colleagues with Bitcoin Cash. The blocks have been mined either every three minutes or with network downtimes of 30-40 minutes:

bsv

The reason is a similar the miners massively left the network after halving, and the hash rate fell by 70%.

As a result of all these adventures, both bitcoin clones were at risk of a 51% attack. At the moment, the price of an attack on the Bitcoin Cash network is at $ 8,000, and for Bitcoin SV is at $ 6,000. These are the costs of renting mining capacities for 1 hour, for comparison on Bitcoin this figure is $ 600,000.

Note, that none of the two cryptocurrencies showed explosive growth due to halving.

Analysis

We break up the myths associated with halving. Let’s start with the price increase before halving, and as we see in the example of Bitcoin Cash and Bitcoin SV, nothing like this happens. On April 8, both coins pumped a little, but as soon as the Bitcoin has corrected, they have immediately rolled back and gone even lower. Therefore, this growth before halving was connected not with the halving of the award itself, but with speculation at this event.

The second myth is that the price will rise after halving to offset the costs of miners. It is supported by the fact that miners will now have fewer BTC, therefore, they sell less and thus do not put so much pressure on the market. And another theory about halving is that bitcoin inflation will decrease by half, the asset will become scarcer and this will also provoke growth. Completely logical arguments, but will they be decisive for the market?

The Bitcoin Cash and Bitcoin SV examples are not very suitable here, because not enough time has passed. But as soon as Bitcoin led the market down, they immediately fell, that is, they are influenced by other factors. And according to Litecoin, we can see the same thing – a halving in August 2019 did not make the asset so strong that it ceased to be dependent on the price of bitcoin. That is, from external market factors.

The third myth is that after halving, in case of a strong drop in the hash rate, the price will immediately fall. In this case, it was not confirmed at all. The panic among the owners of Bitcoin Cash and Bitcoin SV due to the drop by 50% is not observed. No one rushed to sell coins, and it is logical to assume that this will not happen on Bitcoin either.

Our first prediction is that on the eve of the Bitcoin halving, from May 8 to 12, we can see a speculative pump of 5-10%.

The second point – we are not ready to support those who are sure that after halving bitcoin will necessarily increase in price due to a deficit caused by a decrease in the sale of miners. There are other much more important factors, in our understanding, now this is the situation with the international crisis. After all, we have already received one collapse along with the stock market, and we can repeat this situation without problems.

Bitcoin hash rate to sag significantly, and we will see delays in mining blocks. But after recalculating the difficulty, the work of the network normalizes and we will not see any panic sales on this background.

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