Bitcoin experienced its third halving event at around 21:30 on Monday 11 May, reducing the block rewards for miners from 12.5BTC to 6.25 BTC.
The price of the cryptocurrency has remained volatile throughout the event, crashing by over $900 the day before the halving and trading at around the $8,800 mark at the time of writing.
The halving occurred as the 600,000th block was mined on the Bitcoin blockchain, with every subsequent block now earning miners half the reward for verifying transactions on the blockchain.
This change was built into the blockchain at its inception as a method to control the supply of the cryptocurrency.
As the adoption of Bitcoin has increased, previous halving events have often resulted in large price swings, and the most recent halving is expected to be no different, according to a number of analysts.
Analysts and cryptocurrency experts have argued over the direction of this price change, citing everything from economic theory to the building hype around the halving event as evidence for their positions.
During the year after the 2012 halving, Bitcoin’s price rose by 8,000%. 18 months after the 2016 halving, it had increased by 2,000%.
Blockchain expert Simon Dingle previously told MyBroadband that he does not make price predictions, but if previous trends are repeated, then Bitcoin may see a large price increase coming.
“If previous halving events are anything to go by – and they are – then we should see the price of Bitcoin picking up substantially towards the end of 2020,” he said.
Ahead of the halving event, Luno brand ambassador Jason Deane said that there were a number of possible “bullish” and “bearish” scenarios for the price of Bitcoin following the halving.
“It is likely that the mining hash rate will drop, as this has happened at every halving so far,” Deane said.
He added that the security of the blockchain and its rate of adoption should remain largely unaffected, but the price was the subject of much speculation.
Deane said the bearish cases describe a possibility where miners sell off their Bitcoin to pay for upgrades to their equipment, which will be needed as it becomes more difficult to mine Bitcoin profitably.
Additionally, the widespread effects of the COVID-19 outbreak might mean that consumers are not thinking about Bitcoin, and therefore purchasing will decline.
On the other hand, Deane cited basic economic theory as an argument for a potential increase in the price of Bitcoin.
“If you drop your supply rate by 50%, you must drop your demand rate by 50% for the price to remain the same,” he said. “If the demand stays the same, the price will be forced upwards.”
“Markets also run on sentiment. The expectation of a bull run could be enough to create a bull run,” Deane said.
The price of Bitcoin currently remains volatile, and many analysts have predicted that cryptocurrency investors will only see the effects of the halving towards the end of the year.
The graph below, courtesy of CoinMarketCap, shows how the price of Bitcoin has changed since the beginning of 2020.