There is currently a lot of chatter in the Bitcoin community and the crypto industry at large as Bitcoin’s third-ever block halving nears. Set to take place this month (May 2020), there has been a lot of speculation regarding what will happen to the digital currency’s price.
What the Halving Means
In essence, the bitcoin halving means that the reward for mining a block of bitcoin will be divided by two. When the network finally hits block number 630,000 the amount will drop from 12.5 BTC to just 6.25 BTC. This will be the third time that a halving will be happening since the Bitcoin network went live over a decade ago.
Halving is one of the things that set bitcoin apart from all other digital currencies including other popular digital currency networks such as Ethereum’s. In many ways, it is one of the things that drive the price and value of Bitcoin.
As for the impacts, some of them are already coming into play.
Mining Machines Become More Valuable
Needless to say, the halving will have a huge impact on the companies that depend on bitcoin mining. While the systems themselves will not be affected much, their value is a totally different thing altogether.
Now even mining rigs that were previously said to be obsolete have become profitable again. For instance, mining rigs such as the AntMiner s9 and the Avalon A851 are now able to generate between 10 percent to 20 percent gross margin at an average electricity cost of $0.05 per kilowatt-hour (kWh). These margins could increase to as much as 30 percent to 40 percent to miners who adopt more efficient methods.
Even so, considering the dynamic nature of bitcoin mining, this might not be sustainable in the long term. As bitcoin’s halving approaches it is likely that many of the people relying on the older equipment will eventually be squeezed out by people using newer and more efficient mining rigs.
The Current State of Bitcoin
Over the past week, Bitcoin’s price has surged towards the $10,000 mark – this impressive rise has seen the cryptocurrency’s market return to its pre-coronavirus bull run. In fact, the crash losses that experienced because of the impacts of the pandemic have almost been completely erased.
“The interest in cryptocurrencies is now building as investors look to the month-end and forward to May and June.”
-Marcus Swanepoel, chief executive of London-based bitcoin and cryptocurrency exchange Luno.
In general, members of the bitcoin community are pretty optimistic about the future of bitcoin’s price even after the supply squeeze that will take place this month. However, the actual impacts remain to be seen.