Bitcoin, the world’s most popular digital coin successfully underwent its third halving in its history on 12 May 2020, seeing its daily supply of new coin reduced by half. This happens only once every four years and is eagerly observed by cryptocurrency investors for the profound effect halving has on cryptocurrency as a whole.

Halving, in terms of cryptocurrency, refers to the number of coins that miners receive for verifying transactions.

This is now 6.25, down from the previous 12.5 Bitcoins and will halve again after another 4 years.

The last two halvings have been followed by meteoric rises in the value of a Bitcoin, most notably in 2016 after the reward decreased from 25 to 12.5 coins.

So What’s New About the Halving?

This halving is different from the last two times because of the different economic environment it’s taking place in due to COVID-19.

Central banks around the world have injected an unprecedented level of financial stimulus which may increase the demand for cryptocurrencies and Bitcoin in general as they prove to be a hedge against inflation.

Most global markets have recovered since the initial shock due to COVID-19, with Bitcoin also making amends and having recovered its COVID-19 induced losses and pulled ahead of the $10,300 mark.

Greater mining Inefficiencies

Miners now have a reduced incentive to mine for bitcoins because the reward has been halved. The resulting increase in the price of bitcoins may not be enough to keep many miners in business because the power to run computers that solve mathematical problems is substantial.

This probably means that miners will look to similar crypto assets such as Bitcoin SV or Bitcoin cash, both use the same hashing algorithm as Bitcoin, making it easier to switch to. Miners will also be looking for faster and more efficient equipment that can process more hashes than before.