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ThePaper.cn reported that 2020 has arrived and there are only more than 4 months left before the third halving of Bitcoin production. According to the design of "Father of Bitcoin" Satoshi Nakamoto, Bitcoin production is halved every four years. Since the first bitcoin output on January 3, 2009, Bitcoin has experienced two planned production cuts. At the end of November 2012, the reward for the creation of new blocks was reduced from 50 Bitcoins to 25.

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Image from Reuters.com

On July 10, 2016, the new block birth reward was reduced from 25 Bitcoins to 12.5. The third halving will take place around May 18 this year, and the new block birth reward will be reduced from 12.5 bitcoins to 6.25, which means that the daily bitcoin output will be reduced from 1800 to 900.

So, what effect will the halving of Bitcoin production have on the price of Bitcoin and the mining industry?

Positive impact on Bitcoin price

The change in Bitcoin production has a direct impact on the price trend of Bitcoin.

An OKEx investment researcher told ThePaper.cn that most countries in the world define Bitcoin as a digital asset or commodity. He pointed out that when demand remained stable, a decrease in supply would lead to a rise in commodity prices. Looking back at the BTC (Bitcoin) two production reductions in the past 10 years, the price of Bitcoin after 1 year has increased compared to the price at the time of production reduction. He said,

The third bitcoin production cut will also help the price of coins.

The source told ThePaper.cn journalist that in the year after the first halving of Bitcoin production, the price of Bitcoin rose from $ 12.58 to $ 964.48. In the year after the second production halved, the price of Bitcoin rose from $ 649 to $ 2319. Both production cuts have pushed up the price of bitcoin, but the positive effects of the second cut are significantly lower than the first. He said that this was mainly caused by changes in the market environment. As time passed, more and more people held the use of bitcoin, the funds flowing on the market became larger and larger, and the price base became higher and higher. Speculators or investors are becoming more professional.

May put pressure on the miner maker

On the other hand, Bitcoin production halved, mining industry bears the brunt.

Both miner (mining machine) makers and miners (machine ower) are preparing for halving Bitcoin production in May.

A person in the mining industry told a ThePaper.cn reporter,

Having bitcoin output in half means halving revenue. With the currency price unchanged, the payback period will be halved, which will directly affect mining machine sales.

In response, Bitcoin mining machine maker Bitmain may begin to cut staff in response to the upcoming Bitcoin halving.

On January 1, 2020, Bitmain, the boss of the mining machine manufacturing industry, was exploded and launched a personnel optimization plan at the end of 2019. One of the reasons for the optimization is to deal with the "slimming plan" in half.

Another bitcoin mining machine manufacturer, Canaan Technology, which is already listed on the U.S. stock market, once wrote in a risk warning in the prospectus,

Over time, the return on bitcoin mining (measured by the number of rewarded bitcoins) will decline. This may reduce the willingness to mine Bitcoin. The next halving date will occur in 2020, and it is expected that mining will run out in 2140. As a result, the reduction in available Bitcoin mining rewards may reduce the productivity of Bitcoin mining machines.

Miners: store coins and replace miners with low power consumption

With regard to the halving of bitcoin production, Xiao Ajiu, a miner who started working in the bitcoin industry in 2016, expressed concern. He said,

Because I don't know what the market will be after the halving." "Past quotations cannot represent the future. The previous two halvings have risen. It does not mean that this time it will definitely rise.

He told ThePaper.cn reporter that after the output was halved, the biggest problem for him was that all of the small hashrate machines in his hand would be shut down. Unless the bull market like 2017 was encountered, the coin price rose again, or the Antminer S9 series, Avalon A9 series, and Innosilicon T1 all need to be shut down. He said,

Although a machine with a small hashrate does not consume as much power as a large hashrate, the power consumption ratio is generally above 85W/T, and many are 100W/T. Mining coins is not enough to pay for electricity.

Therefore, according to Xiao Ajiu, ordinary miners like him are currently deploying machines with low power consumption ratios. Even if the currency price does not increase after halving, at least the electricity price can be maintained.

On the other hand, he believes that it is best (for miners) to store as many coins as possible.

Mined coins, except for electricity costs, are stored in the rest. Coin price should not increase even if it does not rise.

When Bitcoin output is 0

As Bitcoin output continues to decrease, it is expected that Bitcoin output will run out in 2140.

The OKEx investigators said that Bitcoin's output will not be zero, but its output will be close to zero in the distant future. From the perspective of Bitcoin's production reduction rules, each production reduction is deducted by 50% according to the existing output. Using a simple mathematical formula, it is:

the new reward amount = the existing reward amount/2

When the reward is not 0, this formula will never calculate the result as 0.

Considering the impact on the market when bitcoin output approaches zero, he further told ThePaper.cn journalists,

Objectively speaking, I dare not make any bold predictions for the future. Because this time span is too far away. Decrease of Bitcoin rewards to less than 1 will occur after 12 years, and decrease of Bitcoin rewards to less than 0.1 will occur after 24 years. If the assumption of various external factors is not considered, the impact of the reduction in production on the future market must be to comply with economic logic, the reduction of production will break the balance between supply and demand. The future demand is an unpredictable unknown. If the demand is stable and the supply is halved, it must boost the price of Bitcoin.

For miner Xiao Ajiu, this time is even more distant. He said

To early for me, the last coin was dug out in 2140, and I can't live that long. Look ahead, no one knows the future.




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