What Will Happen When Bitcoin Halves in May?
Updated: May 19, 2020
As a quick overview, miners are rewarded Bitcoins for each block that is mined. Every 4-years, in response to inflation, the rewards are halved. Due to this, we are now approaching an equilibrium in which rewards are just able to cover the costs to mine, which are mainly computer costs and electricity costs. At this point, since miners may no longer experience a profitable return, and in some cases may be experiencing losses, many miners may decide to switch to other chains/coins or cease mining entirely. This would mean that there would be a decrease in new Bitcoins being farmed/circulating the market – various reports state around $60-Million worth; thus, Bitcoin prices may rise or continue to rise in anticipation of this event as it has in the past due to its increase in scarcity/supply.
However, it should be noted that as the prices for Bitcoin rise in anticipation, some miners may remain as they, in turn, anticipate a decrease in the number of miners so they can receive the rewards. While the number of rewards is decreasing so the miners receive a lesser share, a high price of Bitcoin may serve as enough incentive to keep miners around as long as they receive enough to make a profit for their efforts. Since there are only approximately 3-million Bitcoins left to mine – as it has a 21-million cap limit – with the halving and miners leaving the chain, it will take a significant amount of time to mine the remaining 3-million Bitcoins providing some level of stability in terms of circulation post-halving.