Buzz is a-building around Bitcoin right now. Why? Because we’re about to witness an event that only happens once every four years — and something that’s only taken place twice since the world’s biggest cryptoasset was born in 2009.
As rare as an eclipse, a World Cup and your best friend buying you a drink, the Bitcoin halving generates a lot of excitement in crypto circles. It also seems you guys at home are a lot more curious about it. Google Trends data shows how way more people have been searching for info about this since the middle of March.
Here, we’re going to explain what the Bitcoin halving actually is (you can actually see the countdown ticking away) and, if you’ve never dabbled in crypto before, take a look at how and where you can buy it… and why some think now is a good time to do so.
What Is the Bitcoin Halving?
Let’s rewind a sec and look at how the Bitcoin halving works. In all their infinite wisdom, its anonymous inventor Satoshi Nakamoto decided that only 21 million BTC would ever exist.
Under Bitcoin’s rules, new coins are gradually released into the market as they are mined, and those mining these new coins get rewards. However, in order to keep the release of new coins slow and steady, the miners’ reward is cut by 50% every 210,000 blocks.
Why Halvings Are Exciting
Okay. At this point you’re probably nodding along, and perhaps you’re tempted to shrug a little. That’s because we haven’t gotten to the most interesting part yet.
The first-ever Bitcoin halving took place on November 28, 2012 — slashing rewards to just 25 BTC at $12 each. But just look at where it was a year later. Dusting off the CMC archives, we can see that prices stood at $1,031.95 on that date in 2013. That’s an annual rise of 8,500%, the types of returns that would cause most Wall Street investors to faint.
Let’s travel in time to the next halving in 2016, when rewards were about to tumble once again, this time to 12.5 BTC. On the date Bitcoin hit 420,000 blocks — July 9, to be exact — one coin cost $650.96. A year later, I hear you ask? $2,518.44. The real yeast in the numbers was just around the corner. On Dec. 17, 2017, Bitcoin ballooned to its all-time high of $20,089. It took just 526 days for growth of 2,990% to be realized.
The next halving in this month of May 2020 is looming large, and the question on everybody’s lips is whether Bitcoin will pull it off for the third time in a row.
It’s fair to say the jury’s out on this one. You’ve got hardcore crypto advocates who say there’s no question BTC will achieve similar growth to the first two halvings. (According to Rekt Capital, that could put us at a ballpark of $385,000 to $400,000 in the short to medium-term.) Others insist the Bitcoin market has matured, that past halvings had one-off factors such as a rise in the popularity of initial coin offerings, and that the cryptoasset’s recent close correlation to the stock markets is a worry.
Either way, it’ll take 12 to 18 months to know who is right.
How to Buy Bitcoin
With the stock markets taking a hammering of late, you might be thinking about diversifying your portfolio to bring in other asset classes. Bitcoin could be an option — but as we’ve seen, it’s not without risks. Prices can reach for the moon and crash back down to Earth… sometimes in the same week.
If you’re looking to get your hands on Bitcoin, remember that you don’t need to mine it yourself. Mining takes advanced equipment and extraordinarily high levels of energy consumption — and in any case, in this month, just 2.625 million of BTC’s 21 million supply will be left out there to discover.
Especially over the past few years, Bitcoin has become a lot easier to purchase with your dollars and pounds. Some exchanges can link up with your bank account for speedy deposits. Trading platforms focus on helping newcomers by accepting debit and credit cards as a payment method, not to mention PayPal. On some peer-to-peer sites, it’s even possible to buy BTC using iTunes gift cards. What crazy times we live in!
A Few Things to Remember Before Using Fiat Currencies to Buy Cryptoassets
First up, the fees can be a little nasty, meaning some exchanges could end up taking a sizable chunk of your capital. Sure, trading platforms will be treating some of this as their commission — but more often than not, it’s because they need to cover high processing fees from credit card companies and banks.
Another hurdle to be aware of? Know Your Customer (KYC) checks. These are now increasingly being enforced at the insistence of financial regulators, some of whom are worried that cryptoassets could be used for nefarious means. You might need to provide photographic ID before you’re able to get your hands on Bitcoin — such as a driver’s license or passport — and without hitting certain levels of verification, the amount of crypto you can buy on a weekly or monthly basis may be limited.
Bitcoin: Things to Remember
When you’re scooting across the market for an exchange, there are a few top tips you’ll want to bear in mind.
First off, you’ll want to check out their security standards, as some have faced a few nasty hack attacks in recent years. News coverage from trusted sources can help here. Next, check out whether your chosen exchange offers any resources that’ll help you make the most out of the platform. Step-by-step guides, complete with screenshots, can be invaluable when you’re making your maiden purchase.
Don’t be afraid to compare impartial ratings for ease of use and customer service, and be sure to use CoinMarketCap’s rankings to assess exchanges based on their trading volumes and liquidity. This second metric is particularly important, as it may determine how easily you’re able to convert your crypto into other cryptoassets, stablecoins or back into cash.
Don’t forget that cryptoassets are volatile and can carry some risk. Make sure that you only invest what you can afford to lose. There are differing opinions on how much of your portfolio should be devoted to Bitcoin — anywhere from 1% for a casual investor to 10% for an aficionado. And lastly, remember that you’re liable to be taxed on any gains you make from cryptoassets. With agencies in both Britain and America clamping down on investors, it’s crucial to know your obligations.