Bitcoin Halving in 2020 – What Do New Zealand Investors Need to Know?

 Man standing over mountains with Bitcoin sun

Bitcoin Halving in 2020 is Almost Here – What do You Need to Know?

Interest in Bitcoin is once again reaching fever pitch. This is thanks to us being just 4 months away from the next Bitcoin halving. When this happens, the number of new Bitcoin entering circulation each day will be reduced by 50%.

Why Bitcoin halving is a big deal is simple. Past halving events have seen the Bitcoin price soar by as much as 13,378%. The only question is, will 2020 see history repeat?

bitcoin NZ New Zealand halving what is the bitcoin halving

What Will Happen During the Bitcoin Halving?

Every day, millions of Bitcoin miners contribute computing power to the Bitcoin network to process transactions.

Whenever people buy, sell, or transact Bitcoin, the Bitcoin network encrypts transaction information and bundles groups of transactions into blocks of code. It is the job of miners to crack the encryption of these blocks and verify transactions inside.

In return for their work, Bitcoin miners currently receive 12.5 Bitcoin for every block of transactions they process. However, this will soon change.

 

The Bitcoin Block Reward Halving

In May this year, the current Bitcoin block reward of 12.5 Bitcoin will be reduced to 6.25 BTC.

As mining requires significant investment, miners who want to stay in business will have to charge more for Bitcoin they sell on the open market. This (in theory) will push Bitcoin prices higher. However, other factors can also influence Bitcoin prices.

  • Fewer Bitcoin entering circulation increases the scarcity of Bitcoin.
  • 85% of all available Bitcoin is already in circulation. This gives Bitcoin comparable scarcity to precious metals like gold.
  • Past Bitcoin halving events have seen investors rush to buy Bitcoin just before and after halving, while prices are still low.

Bitcoin next to gold image with gold bars

Lessons from Bitcoin Halving History

Bitcoin halving events take place approximately every 4 years. To date, there have been two halving events. Both have seen the Bitcoin price skyrocket. What everyone, therefore, wants to know, is will this trend repeat in 2020?

As a rule, there is no way to guarantee how the cryptocurrency market might react to the next Bitcoin halving. However, there are reasons for investors to be positive.

Bitcoin price NZ log scale graph from coinmarketcap

Bitcoin Today is Better Established Than in 2016

When the Bitcoin block reward was reduced in November 2012 and July 2016, Bitcoin wasn’t nearly as well known as it is today. Since then, Bitcoin has gone mainstream.

  • Major brands like Burger King now accept Bitcoin payments in some locations.
  • Bitcoin futures trading has gone mainstream.
  • Major financial institutions like J.P. Morgan Chase & Co now recognize Bitcoin as a mainstream investment asset.

With Bitcoin adoption levels higher than they have ever been, some speculate that 2020’s halving will mirror past halving events. Some technical indicators also suggest that major gains might be likely.

Bitcoin halving 2020 infograph nz

Technical Reasons to Get Excited About the 2020 Halving

2018 to 2020 has been a turbulent period for Bitcoin. In December 2018, the Bitcoin price fell to a low of $3,152 USD. Curiously, though, this occurred 519 days before halving in May 2020. This is significant as the last time Bitcoin reached a major bottom was 544 days in advance of the 2016 halving.

In the 12 months after bottoming, past trends also show Bitcoin prices appreciating by 340% to 380%. At present, a case can, therefore, be made that Bitcoin may be on the cusp of a major breakout.

Of course, no one can say how Bitcoin will perform in 2020 with any certainty. As a result, Kiwis should never risk more than they can afford to lose if they do invest.