If you are not someone following the ups and downs of bitcoin, you probably have not heard about a big event next year. It is called the “halving.” It will cut creation of the cryptocurrency by 50 percent.
A cryptocurrency is any form of money that exists online and operates without a central bank. Bitcoin is one of several such currencies.
No one person or group is in control of this halving process. It is a rule written into bitcoin’s computer program by its creator Satoshi Nakamoto more than 10 years ago.
The event is expected in May of 2020. It would cut by 50 percent the number of new bitcoins given to bitcoin miners. These miners create the world’s supply of cryptocurrency by solving complex mathematical questions.
The halving represents a big change in a market worth about $120 billion. Bitcoin worth several billions dollars are created every year.
Bitcoin market players are predicting sharp price increases as well as sharp drops in the value of the cryptocurrency. Such moves have happened in earlier halvings, which take place about every four years. The point of a halving is to keep down the number of bitcoins and control inflation.
There are likely to be winners and losers. So, those who buy and sell bitcoin are trying to predict the future of the cryptocurrency markets.
“This is the biggest question right now for most of the industry,” said Eyal Avramovich. He is chief executive of MineBest, a Poland-based company that mines bitcoin.
The drop in bitcoin’s production is one reason why the digital currency has not been accepted by established financial markets and organizations. Its future value is decided by technology and not, some say, by the rules of economics.
The rules of economics say that if supply is cut and demand stays the same, prices rise. The Reuters news agency spoke with seven cryptocurrency traders who said that the halving will lead to greater price volatility. They added that since the cut in supply is expected, the…