On May 11, 2020, the third halving for bitcoin happened, from the theoretical perspective the bitcoin rewards are halved after every four years. With the recent halving happened, the current reward against bitcoin mining stands at 6.25, reduced from 12.5. Going forward, the bitcoin halving is expected to continue after every 210,000 blocks till last bitcoin is mined in 2140. The event can simply be explained from Economics101 whereby the demand and supply rule come into play. As more people start mining bitcoin, the competition and increasing supply reduces the reward for the miners to mine bitcoin.
The recent bitcoin halving event is interesting to discuss. Although, like previous bitcoin halving events, the bitcoin did rally before the event by $2000 from $7500 to $9500 in a weeks’ time. However, this time it round of halving is a bit different than the rest due to an ongoing pandemic named as Covid’19 where the international markets have flunked and businesses have stopped. With the turning of oil futures into negative and the stock market mainly S&P, DOW Jones declining by more than 20% since Jan2020 and with the influx of employed people and job cuts – the globe is ready to witness a change in lifestyle, consumption patterns and investment preferences.
From luxury to now essential goods, and from risky assets to now safe avenues – the investor is ready to reflect this change post-Covid’19. As the pandemic is taking pace, the preference for people not to spend money in risky assets and consumption towards healthcare products is rising. With such dynamics, the role of bitcoin comes into play which is a complete digital and secure peer to peer transaction. As work from home is gaining momentum, e-commerce sales are sky-rocketing – the next big trend which yet to come is digital payments.
Alternatively, one can also look bitcoin from the lens of investment perspective whereby investors would prefer safe investments and something that is yet to witness growth. In times when interest rate cuts are on cards, the stock market is absorbing shocks and whereby the cash is losing its worth – bitcoin appears to be a growing asset together with stable cash flows via mining rewards.
While the bitcoin mining reward is declining, still the comparison between bitcoin reward outweighs the cost of mining. Having said this, the master nodes is another area where the investors can set up the process and generate passive income flows.
Finally, one can argue in such uncertain times when investors are cashing out on their investments and preferring saving accounts more – how come bitcoin appears to be a lucrative investment. While the synthesis holds true, still the expected growth in digital payments, passive income like master nodes and dividend type rewards in the form of halving provides enough reasons for investors to take a bet on this new and trendy investment avenue and make the most out of it during global crisis times too.