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Bitcoin Halving Basics

The moment has arrived for “The Halving”. Despite receiving no significant coverage in the mainstream media such as the New York Times and being superseded by the likes of coronavirus coverage, the Halving is actually quite a big deal. The Halving is one of the most anticipated moments in cryptocurrency history due to the rewards it may reap for investors. In a nutshell, the event is the reduction of the number of block rewards, or bitcoins, coming into circulation being halved from 12.5 to 6.25. The Halving has occurred twice previously in the history of bitcoin, occurring every four years. The hope of investors is that the Halving will result in a spike in wealth, for while the supply of new bitcoin will be reduced, demand will theoretically remain as is, increasing the desirability of each individual coin. This should drive up the price per bitcoin. 

Though the hopes of investors lie in this short-term price fluctuation, the longterm effect for bitcoin may be the transformation in the function of bitcoin, since the minting rate will also decline. Aside from investing in and trading bitcoin, those who engage with the currency sometimes also mine it. Mining is incentivized by the minting rate, and is a vital aspect of the security architecture of bitcoin. Mining, in effect, encrypts transactions. As more bitcoin enters circulation and each Halving occurs, the reward for mining will dwindle, possibly undermining the security apparatus of bitcoin. 

In the eleven years since bitcoin’s release, not all bitcoins have entered circulation. The “birth” of each bitcoin is as a block reward uncovered by miners, or those who engage with bitcoin by mining the algorithm through enormous computing power, generally within a group of other miners. Every 210,000 blocks, or approximately each four years, a Halving occurs in which the total amount of bitcoins available to be mined is halved. In 2009, at the beginning of bitcoin, within each ten minutes, fifty bitcoins could be mined. The rate halved twice previously to reach the rate of 12.5 coins per ten minutes, which this Halving cuts to 6.25 per ten minutes. In about the year 2140, the entire process will be finished when the total sum of 21 million bitcoins enters circulation. This demonstrates how much more lucrative mining bitcoin was in 2009 than it will be in 2021. 

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Bitcoin’s halving coming up! What to expect?

It took just over 10 years from we could first read the whitepaper about Bitcoin to the blockchain network software system code release back in 2009. Bitcoin was quickly created right afterwards. Counting back to that they, Bitcoin has seen the light of day for 4,141 days. Impressive for the first real borderless payment network without any centralized control system and with a new kind of money – a digital only currency. 

Exciting times ahead of us. In less than 1 day, we will witness the 3rd Bitcoin halving of the remaining 33 left. An important part of halving is the reduction of income for the miners. The reward is cut from 12.5 to 6.25 Bitcoins. This is a huge drop in value. The currency is growing, meaning that more people are involved in mining, but less Bitcoins are distributed for this purpose per day (24 hours) among these people. In less than 24 hours, only 900 BTC will be issued per day, as opposed to 1,800 BTC per day. This must, partly, push the price up just to ensure that the miners, now receiving half, will still get a reasonable pay. Halving happens after every 210,000 transactions and will stop around year 2140. That is a long ways away. As there is a limited amount of Bitcoins, the systems squeeze the price upwards.  The largest amount of Bitcoins, about 88%, were issued within the first 11 years. The remaining 12% are spread over about 120 years. 

We have seen halving before, twice. What everybody wants to know, of course, is where will the price go after the halving? Will it go up or will it go down? Historically, it has gone up, and it has gone up big time. The first halving occurred on 28 November 2012 and the price went as a rocket right after. The following year, the price went from less than $20 to over $1,000, giving Bitcoin owners an annual return of 8,000 percent. That is impressive. The second halving, on 9 July 2016, saw similar results. A year after Bitcoin’s second halving, the price went 280 percent. It went less, but the price reached the all-time high of about $20,000 at the end of 2017. Bitcoin is currently trading at around $8,500. In other words, plenty growth opportunity just to reach the all-time high. 

If we look at where people are from that search for the work “Bitcoin halving”, we find Malta, Saint Helena and Luxembourg. Three places that fairly regulate cryptocurrency. All these places, and the rest of us, try to predict where the price will go after the halving. Nobody knows, but, one thing is certain, that we will all follow what is happening the next couple of hours to see if our investments are kept safe and to hope for a great start on the next 12 months. 

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Global recession can be good news for Bitcoin

The decentralized cryptocurrency Bitcoin is considered one of the trustworthy cryptocurrencies in the market. There are many cryptocurrencies, but not all are worth the time or the money. If times of turmoil Bitcoin can be a safe port to park part of your money because Bitcoin is a hedge against inflation. Bitcoin is capped at 21 million Bitcoins. If this would apply to a central bank or a treasury, the institution would not be able to print more money. We have not reached 21 million quite yet. Bitcoin is also pre-programmed to cut the pace of supply expansion by 50 percent every four years.   

Many experts believe that the result of such pre-programmed reduction in supply is a sign to buy. This means that whenever there is deflation or an economic collapse, it is a sign to buy Bitcoin. There have been many collapses lately. We have seen the oil price crash and the unemployment numbers have sky-rocketed due to the coronavirus outbreak. 

In times of deflation, people rush to the dollar. The dollar is a good currency to have because it stays strong. It is a trustworthy currency. That again is a good sign for Bitcoin as people with cash, and with cash in dollars, tend to use them. In a deflation people with cash get more for their money than people without cash due to the reduction in the value of things. Bitcoin is a place to put value. 

The uptick in the purchasing power will likely draw greater demand for bitcoin, as the cryptocurrency is already used as means of payment.  The cryptocurrency’s appeal as a medium of exchange is likely to continue strengthening with the growing prevalence of technology in consumers’ everyday lives caused by the coronavirus pandemic.  

Bitcoin has always been seen as the gold of the internet because it has many of the same characteristics. Gold is spare. There is not much gold around. When something is limited, and cannot be produced, it is easiser to use it as a measure of value. Like the yellow metal, the cryptocurrency is durable, fungible, divisible, recognizable and scarce. Bitcoin has one up on gold, as Bitcoin can actually be used as a form of payment. 

Gold can be used as an indicator for how Bitcoin performs during crisis due to their general similarities. All data shows that gold performs well during deflation, which includes a sharp rise in financial stress and increased risk of corporate defaults. Companies with a lot of debt struggles and many goes bankrupt. Gold is also doing well in inflations, but it is when deflations occur that the true strength of gold comes out. We are set for global recession and global deflation. It is therefore time to pay extra attention to the Bitcoin right now. If you have time and interested, watch it. 

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Time to buy, 2 year high for the Bitcoin – S&P500 correlation

In an effort to better analyze Bitcoin, and especially fin the best way to buy the cryptocurrency, it is important to know when to buy. People follow different charts, indexes, commodities, stocks, bonds and currencies to determine the moment. The S&P 500, also called the S&P, is an index of the 500 largest companies on the different stock exchanges in the USA. It is important to remember that the US has something like 30 stock exchanges. It can be quite challenging to follow all these exchanges. There is therefore a separate cross-exchange index just looking at the 500 largest companies. You can speculate by buying index funds or similarly try to pick within the S&P. The index has given the great return of 9.8% since the start of the index back in 1926. That is quite the impressive number. 

If we look at the S&P and Bitcoin, we will note that their correlation has never been better in the last 2 years. This is a typical sign for buyers to buy Bitcoin. The market is called bearish when the market indicates to buy. In other words, this correlation is a bearish sign for the cryptocurrency market. The reason for this correlation is the current pandemic, which has sent the global stock markets straight down, and caused likely recession in most countries’ economies. When markets are going down, it is a sign to buy. The question is always what to buy when turbulence ride the markets. 

Time to buy

Several experts have now pointed out that Bitcoin data shows that when the correlation with the S&P 500 is high. The correlation between S&P and Bitcoin is generally high on major downturns in the cryptocurrency markets. It is therefore important to pay attention to all the different market mechanisms in front of you and not just the regular indexes. The cryptocurrency market has also become an indication on how willing investors are to invest and also an alternative investment place to the regular stock market. 

Investors coming back to Bitcoin

It is important to remember that cryptocurrency is definitely a confidence game. If you want to invest money you need to invest in something you believe in. As the markets are going through another downturn some doubt Bitcoin and other cryptocurrencies as dead. However, this is a statement that has been put forth in other situations where the market has gone through turmoil. However, investors are quick to forget and always interested in new avenues to make money than just stocks and bonds. 

Looking back at the last period, Bitcoin has been quite resilient as the asset recovered by nearly 80% in just one week. If you are interested in diversifying your portfolio, look towards Bitcoin as Bitcoin are looking more tempting now than in a long time. 

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Oil price below zero as oil demand collapses

The oil price is a commodity price that sets the standard for a lot of activity and trading of other commodities, sticks and bonds around the world. Today, Monday April 20th, 2020, marks a new day in history. The US oil price fell below 0 USD. Oil is priced differently according to where it is from, quality and characteristics. 

The oil price crashed because of the overproduction that is happening in the oil market. The corona pandemic has reduced the demand in oil prices beyond what we have seen in many years, while the oil producers have continued to produce large quantities of all. The North Sea oil is still trading at around 25 USD and thus the differences in pricing are huge compared to what it usually is. 

In the evening we even saw the price per barrel fall as low as minus 40 USD. That is a huge amount of money to receive to accept oil. The pricing challenge has occurred due to the lack of storage. The oil producers are dependent on a party buying oil, and the partner buying oil needs to store it somewhere. The current problem is that storage facilities are filling up. It is not so easy to just turn off the oil wells, but with the current problems, turning off the oil wells might be an alternative to giving away barrels of oil with a check attached to each barrel.

The collapse in the oil price will also cause political problems internationally. On April 11th the OPEC countries and their friends, called OPEC+, entered into an agreement to cut production with 9.7 million barrels of oil per day. This is about 10% of the daily production and considered a substantial number. However, even though substantial, the number is small compared to amounts of barrels per day continuously overproduced. We are currently looking at a daily overproduction of 18 million barrels per day. Rystad Energy has said that peak oil occurred in 2019 and that the oil overproduction was as much as 28 million barrels per day before the OPEC+ cut.President Trump will suffer a major political blow from the collapse in the oil price because he has gone to great lengths to protect the oil sector. Trump has been displayed in the media as the new master of oil policy when forcing through with about 10% in cuts per day, even though just for May and June. The American shale sector has transformed the US into the world’s largest oil producer in the past decade, giving the president a foreign policy tool, he has brandished as “US energy dominance”. That however is now changing quickly. There is no quick stop to the bleeding and the many bankruptcies that will come from the collapse. Are you following the news daily? It is time to tune in and protect your wallets as it is time to buckle down and take the hit. 

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Oil price may fall to $10

  • Oil prices have fallen rapidly and fewer are driving and using less oil and gas. This means that the companies have no money available and postpone both planned projects and maintenance. Not only that, but we also see that projects approved by the authorities are postponed. This is the last thing companies want to postpone and has serious consequences.

The world may soon run out of space to store its extra oil as Saudi Arabia prepares to increase its fossil fuel production even as global demand for energy continues to fall.

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Burying Bitcoin Code for a Doomsday Scenario

Aside from Arctic enthusiasts, not many people know about Svalbard. Part of an archipelago, the Norwegian island has few year-round inhabitants and more polar bears than humans. Its major association has been with coal mining and Arctic exploration, but now cryptocurrency is touching one of the world’s least-peopled locations. Regulated by the international Svalbard Treaty as a demilitarized zone, it is considered one of the most geopolitically stable human habitations in the world. 

The island already hosts the Global Seed Vault, which is a repository of an enormous variety of plant seeds, held as “duplicate samples” should the world need them one day. In case of regional or global crises, local seed banks may be compromised or destroyed, hence the need for storage in such a remote location. A tunnel leading into the seed bank is 120 meters, or 390 feet long, leading into the inside of a sandstone mountain, and is heat sealed to exclude moisture. The location was chosen because the area lacks tectonic activity and its existing permafrost aids in preservation. 130 meters (430 ft.) above sea level, the site of the vault will remain dry even if the ice caps melt. 

Taking inspiration from the seed vault, the tech world is likewise constructing a repository a mile away from the Global Seed Vault, in a decommissioned mine shaft. The mission of the GitHub Archive Program is to preserve open-source software for the foreseeable and unforeseeable future. Partnering with numerous foundations and world-renown libraries, the program will store multiple copies, on an ongoing basis and in varied data formats, as well as a very-long-term archive designed to last over 1,000 years. A “snapshot” of the myriad code will be copied onto film reels and stored in a steel container. 

The vault will also be 250 ft. inside of a mountain, and will include Bitcoin Core, the most popular code implementation of bitcoin’s infrastructure, which is also one of the most accessed repositories on GitHub. The official deposit into the mountain is slated for late April, but there is no word yet on whether the date will be pushed back due to coronavirus measures. 

Cryptocurrencies

Though Bitcoin Core is featured, the majority of other cryptocurrency projects on GitHub will also be included, such as bitcoin’s future-forward Lightning Network, as well as infrastructure code for other cryptocurrencies such as etherium and dogecoin. The current electronic record is quite fragile and apt toward disruption, therefore having a hard copy can help avoid a hole in history. A terrifying amount of the world’s data is stored on ephemeral media, such as SSDs, CDs online reliable for a few decades, and backup tapes, all of which assume a maximum 30-year lifespan in controlled temperature and humidity environments. If cryptocurrency manages to last a millennium, this will aid people 1,000 years from now in figuring out how it evolved, or if it is supplanted, to learn what cryptocurrency was.

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Bitcoin Halving in a Nutshell: Part 2

The halving is on the forefront of bitcoin investors’ minds (likely second only to the coronavirus), due to the belief that it will quickly compound the price of bitcoin, likewise compounding their wealth. However, is this belief well founded?

Btc

In its history, bitcoin has seen two prior halvings, which can be looked to for guidance. 2012, the first halving, was a test run for the reduction in mining rewards and effects upon bitcoin price, and indeed, shortly after the halving the price began to rise. The second halving in 2016 was so highly anticipated that Blockchain.com even had a running countdown. The first effect of the second halving was an immediate price drop of 10% to $610, with a swift recovery to its prior price. Huge gains did not immediately follow either of the prior halvings, however, they did usher in steady growth in the price of bitcoin. This may prove the theory that while the rate of available bitcoin drops, the demand stays the same, resulting in a growth in price in what bitcoin is already on the market. Others argue however that because the halvings are scheduled and anticipated for years before, they don’t compel a quick response from the market, as traders have had plenty of time to prepare. It is also possible that in anticipation of getting rich quickly due to the halving, some traders will buy more before the halving, pushing the price up in anticipation. 

To return to the topic of block rewards, bitcoin’s monetary policy relies on the ability to answer through the bitcoin ledger, who owns what bitcoin when. Cryptography answers the first part of the question since only the owner of the private key (much like a secret access code) can spend that bitcoin. However, the “when?” part of the question is what truly distinguishes bitcoin from any form of money that came before it. In theory, with enough computing power, miners could put the system into chaos by double spending coins or by halting transactions from continuing. However, they are incentivized not to do so through block rewards, which they would lose if attempting either. Miners are incentivized to mine honestly through their wish for money, and not to attempt dishonesty, in their drive to keep that reward. As miners gain more monetary rewards into mining, the increased computing power results in a stronger, quicker system overall. Therefore, what happens when the rewards for mining eventually trickle down to zero? This may eventually prove to be an issue for bitcoin. Mining is an expensive venture, so not only do miners need to be incentivized, the reward must surpass the cost of the activity. The only other way that miners earn money is through transaction fees, which may grow in importance. This means that while transactions fees are theoretically optional now, they will become quite costly in order to keep the network safe. Bitcoin is still relatively new, and for now, the minimum cost of security is still an open question. However, in eight to ten years, as rewards really dwindle, this could grow into a bigger issue. 

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Bitcoin Halving in a Nutshell

Bitcoin halving is due to occur at some point in May 2020. What is it, and what does it mean for investors? “The halving” is one of the most anticipated events in the history of cryptocurrency. In short, the number of block rewards, or bitcoins, dropping into circulation, will be reduced by half from 12.5 to 6.25. This has occurred every four years, twice before in the existence of bitcoin. Theoretically, the halving may result in quick wealth, since while the rate of supply of new bitcoin will be reduced, but demand will hopefully stay the same, making each coin more desirable and possibly compounding its price. This is why to existing investors, the prospects of the halving are exciting. 

Aside from a possible short term price fluctuation, the more relevant effect for bitcoin may be the change in the function of the currency due the decline in minting rate. The incentive for mining bitcoin is an essential component of the security the currency offers, since mining is what encrypts transactions. With time, as more bitcoin enters the world, the reward for mining dwindles, which will eventually undermine that entire side of interacting with the currency. A more thorough explanation of this process follows. 

Not all bitcoins that will eventually exist have yet entered circulation. The way that each new coin is “born” is as a block reward received by “bitcoin miners” who, generally in teams, engage in “mining” through immense joined computing power. Approximately every four years, or every 210,000 blocks, the total sum of bitcoins available to be mined is halved, which is the event occurring at some point in May 2020: “The Halving”. This also explains why a specific date and time for the event is not yet known, since it is through mining the 210,000 blocks that the halving occurs. 

At the dawn of bitcoin, 50 coins were mined within every 10 minutes; however, that rate halved every four years to the current rate of 12.5 coins each 10 minutes. The total amount of 21 million coins will be the ending point of the entire process, likely in the year 2140. This illustrates why bitcoin mining was far more lucrative a decade ago than it will be a decade from now. 

Satoshi Nakamoto, the pseudonymous individual or team behind the creation of bitcoin, disappeared in 2010, and so the reasons behind the methodology are not new. Shortly after releasing the bitcoin whitepaper, Nakamoto, who could not yet have known the future success of bitcoin, theorized how the reward system may play out. Bitcoin differs from most centralized monetary policies in that the supply schedule is set in stone, whereas a central bank, such as the US Federal Reserve can control the supply of money in circulation. The bitcoin supply schedule removes politics and human machinations from the equation, resulting in a predictable inflation schedule.

The unwavering scarcity of bitcoin is what makes it valuable. In stark contrast to bitcoin’s halving reward, the quantity of US dollars in circulation has roughly tripled since 2000, largely as result of human intervention and government bailouts. Therefore, Nakamoto’s choice to end the reward for mining bitcoin at 0 may be a political statement as well as monetary policy. 

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Bitcoin Updates in the Time of the Coronavirus

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At a time of unprecedented upheaval in the traditional markets due to the worldwide coronavirus pandemic, is Bitcoin plunging as well or is it a safe haven? Would are Bitcoin investors to expect from cryptocurrency in the uncertain future to come? Perhaps a result of the political fallout and economic tumult, decentralization is to play a stronger role in the world post-coronavirus. While tourism, restaurants, travel, and many others are being pummeled, this is a time of great opportunity for the likes of healthcare and health technology. Whether Bitcoin is a safe haven at this time is a matter of whether the factors affecting its rise and fall are seen as forces of detriment or opportunity.

Panic sell

For those investors who have recently bought into cryptocurrency and who do not hold a great deal of it, this is a moment in which many may panic-sell and return to more traditional holdings. Similarly, some investors must sell in order to convert their crypto holdings to pay for living expenses at a time when most individual’s incomes have suddenly ground to a halt. These types of sales do drop cryptocurrency prices. 

Since cryptocurrency is only a tiny share of the overall financial market, it is inevitably affected by enormous upheavals such as the one in play now; however, because Bitcoin is of a finite supply that is unwavering regardless of traditional financial markets, it is a safer bet. Interestingly in the past few weeks, institutions in both India and Korea have opened freer pathways forward for the crypto industry. 

Print money

In some of the bailout situations occurring around the world and in the US, long-term problems will follow the current stopgaps, which may result in governments just printing more money. The depreciation of fiat currencies is obviously problematic when your assets are held in those currencies. Obviously in that case, Bitcoin is a safer bet.

The beauty of decentralization at times like these is that the teams powering blockchain technology are dispersed throughout the world. Therefore, while this pandemic is worldwide, it does not affect all areas simultaneously or equally, allowing for growth opportunity in areas where teams are able to continue working. 

To conclude, we may see some currency fluctuations, as a result of panic-selling or of sales that are necessary for investors to cover living expenses while traditional economies are paused. However, the likely effect of government bailouts will be the devaluations of fiat currencies, which cannot occur with the likes of Bitcoin, the quantity of which is finite. Therefore, the financial world post-coronavirus is headed toward decentralization. Cryptocurrency investment is the long game, and to truly see results and the fruits of investment, one must be in it for a stretch far longer than this crisis looks to be.