Rewards, Bitcoin Mining, and Bitcoin Halving
The rewards for bitcoins change every four years or after reaching the target of 210,000 blocks mined through the process of Bitcoin mining that allows the verification of bitcoin blocks or transactions. This verification is happening every couple of minutes, so it can be safely said that new blocks continue adding to the network with their rewards at a very high speed.
However, there is a limit to mining, and once it reaches its limit of 4 years or 210,000 blocks, the rewards start changing through the process of Bitcoin halving, and it is considered as a very important factor that changes the value of Bitcoin. Every time 210,000 blocks are mined or introduced in the market; their rewards get halved.
To understand it in a better way, let us go back to 2009 when Bitcoin was first launched. At that time, the Bitcoin rewards were around 50 BTC per block. When the first halving event happened, the rewards halved down to 25 BTC per block, and by the second halving event, the value of rewards had gone down to 12.5 BTC per block. The latest Bitcoin halving happened in May 2020, and the current reward is 6.25 BTC per block.
After every halving even, the Bitcoin price has shown fluctuation because these rewards for the miners is what brings the change in the inflow of new bitcoins in the market. When the rewards are halved down, the inflow of new bitcoins in circulation also decreases. Now, as a simple rule of macroeconomics, when the supply reduces, the demand goes up or down, depending on several other factors too. However, if the demand goes up, then the prices also automatically go up.
And this is what happens after Bitcoin halving too. Its price soars and throughout the pandemic-ridden 2020, Bitcoin’s prices have gone high in comparison to the previous years, or the pre-COVID era.
And this is the main reason that has led Bloomberg’s analysts to wonder if the price of Bitcoin will go up to $50K in 2021?
The answer is yes as the chances are really high!
Bitcoin Inflation and Deflation
The nature and infrastructure of Bitcoin are based on deflation mainly. Inflation reduces the power of Bitcoin purchasing. Every Bitcoin halving helps to bring down Bitcoin inflation too so that its purchasing power and rate increase.
Back in 2011, the Bitcoin Inflation rate was around 50 percent, but after Bitcoin halving in 2012, the inflation rate dropped down to 12 percent. By 2016, the Bitcoin inflation rate was 4 to 5 percent. After the 2020 halving, the Bitcoin inflation rate is 1.74 percent. This means that the value of Bitcoin has increased a lot in all these years.
The Changes in Value
In 2016 when Bitcoin saw its second halving event, its value was $650. After the halving, by December 2017, the trade value of Bitcoin had gone up to $20K or $20,000.
At the time of the halving event in May 2020, the value of Bitcoin per block was around $8500. By December 2020, the value of Bitcoin soared up to $27256! In January 2021, the value has surged to $37087.
So, it is safe to say that with the recent halving and drop-in inflation rate, there are high chances that the value of Bitcoin will go up to $50K or $50,000 soon.
I’m Ava Paul, an experienced news website author with a special focus on the entertainment section. Over the past five years, I have worked in various positions of media and communication at World Stock Market. My experience has given me extensive knowledge in writing, editing, researching and reporting on stories related to the entertainment industry.
