The virtual currency Bitcoin hit
another milestone a couple days ago when the reward for generating
new Bitcoins was cut in half. Previously, when a new block was
generated, the miner (or mining pool) responsible for generating the
new block was awarded 25 Bitcoins for the efforts. Now with the
reward halving come and gone, the same amount of effort produces only
half the rewards, 12.5 Bitcoins (it actually takes more effort now as
the difficulty for solving a block increased at the same time the
reward decreased).
All of this and the Bitcoin price
remains relatively flat, trading around $650 USD per Bitcoin as of
this writing.
Many expected the price of Bitcoin to
double when the reward was cut in half, and in many aspects, this
makes a lot of sense. After all, the electricity cost and
maintenance/upkeep of mining equipment hasn't changed – it still
costs roughly the same to generate a new Bitcoin block, but since the
reward is less, the price should be more to compensate, right?
Well, maybe, maybe not.
Let's rewind to the end of last year
when talk of the Summer 2016 Bitcoin halving first started hitting a
fever pitch. At the time, Bitcoin was trading at $300-350 each and
mining enthusiasts were snatching up and setting up Bitmain's
Antminer S7 just as fast as they could.
Since then, the price HAS doubled. And
for the last several weeks the price of Bitcoin seems stuck at
approximately double the price of Q3-Q4 just last year.
So has the doubling in price already
happened and we just missed it because it was slow and gradual and
happened over months instead of overnight? Or is the price increase
of the previous months just a glimpse of what is to come? At this
point it is still too early to say, and the Bitcoin markets appear
indecisive with most traders still sitting on the sidelines.
As mentioned in my previous posts, the
Bitcoin price is being squeezed sideways. It'll move up a little or
down a little, there's some panic selling here and some fickle buying
efforts there, but overall the price is just kinda bouncing along in
a sideways trading range with signs of trepidation and indecision. I
don't know what the market is doing and I don't think it knows yet
either. Hopefully a better trading pattern will emerge soon.
Is Now a Good Time to Invest in
Bitcoin?
One recurring theme that has been
popping up along with the reward halving chatter, is whether or not
now is a good time to buy and/or invest in Bitcoin. Those bullish on
Bitcoin say that it is now more rare than ever and more difficult to
earn new Bitcoins. Those who are bearish on Bitcoin say the market
is in a bubble, is too fickle/volatile, and that whales are waiting
to dump their Bitcoin hoards and beat the price down.
Both Bitcoin bears and bulls have valid
arguments, but the Bitcoin markets and price are on the fence so
until that changes, I'm on the fence and undecided as well.
Points to Consider Before Buying or
Selling Bitcoin in Today's Market
Before dumping your life savings into
Bitcoin or trading your hard earned coins for cash, here are a few
points to consider:
- In the last several years, the price of Bitcoin has been much higher than it is today, with a stretch of time in the $1,000+ range.
- In the last several years, the price of Bitcoin has been much lower than it is today, substantially lower. The market is volatile, offering high risks and high rewards. Don't invest more in Bitcoin than you can afford to lose.
- With recent events, Bitcoin markets remain undecided in a sideways holding pattern. Indecisive markets can mean big swings up or down... Making an investment decision right now means significantly higher risks, but also potentially huge rewards.
- It will take time for the full effects of the reward halving to be felt. New blocks (and Bitcoins) are generated approximately every 10 minutes while maintenance and electricity bills are usually paid on a bi-monthly or monthly basis.
- If the Bitcoin price doesn't go up soon, entire hordes of mining equipment will either be operating at a loss or taken offline due to an inability to run profitably. This would lead to a DECREASE in the difficulty of generating a new Bitcoin block, or at least keep the difficulty relatively flat for one or more adjustment periods.
- Antminer recently released their newest SHA-256 ASIC miner, the S9. This miner offers a huge leap in efficiency and mining power and is being unleashed in bulk on the mining community. As more S9's come online (as well as next gen miners from other companies), more Bitcoins will be generated quicker until the difficulty rises to slow them down. Yet another factor playing on the Bitcoin price.
At this point it's tough to say exactly
what will happen with Bitcoin's future but one thing's for certain,
Bitcoin use is increasing worldwide and it isn't going anywhere
anytime soon.
