The third Bitcoin halving is approaching. In the past few months, Shenyu has participated in more than a dozen live broadcasts non-stop. We compiled his views on the halving in these live broadcasts and shared them with you.
For the entire blockchain industry, the most watched event in 2020 is the halving of Bitcoin block rewards. First, let me briefly introduce the halving:
When Satoshi Nakamoto designed the Bitcoin output protocol, he formulated two rules. At the beginning, the block reward dug out every 10 minutes was 50 Bitcoins. After every 210,000 blocks, the Bitcoin block reward was halved. , from 50 to 25 to 12.5 to 6.25 after this year's halving, and so on, until the total amount mined reaches 21 million. According to the above rules, it can be calculated that the time required for each halving is four years.
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Count the bitcoin halvings I have experienced
Image source: Weibo @神鱼BTCer
Image source: Weibo @神鱼BTCer
The first halving can be said to be very dangerous. Many miners will have to shut down due to machine or income reasons, so the computing power of the entire network is very low. Large organizations with ulterior motives can launch a 51% attack on Bitcoin. However, because the Bitcoin network is in its early stage, it has basically not attracted excessive attention from the outside world, so the first time was considered lucky and safe.
The second halving was in 2016, and it was also a bear market at that time. Because of the decline in 2015, it was halved in a long bear market. What impressed me the most in this round is, let me give an example of mine:
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Image source: Documentary "Inside a Secret Chinese Bitcoin Mine"
Later, we found that the electricity bill was high during the day—shut down—dig at night—not enough, and we were forced to optimize the electricity bill to more than 30 cents. Many colleagues around us were in the same situation. When the price is halved in 2016, we are forced to go to Sichuan and Inner Mongolia to find cheaper electricity costs.
Image source: Weibo @神鱼BTCer
Image source: Weibo @神鱼BTCer
It’s the third halving, because everyone thinks that Bitcoin is a safe-haven asset, hedging a series of risks caused by international economic instability, including currency circulation. The problem that everyone is facing now is the issue of life and death. We will not consider where to save the money, but how to survive. Therefore, in this case, we will definitely sell the assets that are in circulation first and keep a large amount of cash. In the short term, Bitcoin has a strong connection with the traditional financial world. In the past, when people had abundant supplies and no pressure to survive, Bitcoin was a good choice when considering investment and asset security. Now facing such challenges, we It must be ensured that there is enough rice at home, so under the circumstances that the epidemic situation has not been fully resolved in the future, there will not be a lot of capital inflows in the market in the short term.
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Will Halving Bring a Bull Market?
The impact of halving on the cryptocurrency market will become weaker and weaker. Because 18 million bitcoins have been dug out, the impact of future bitcoin output on the entire market will not be so great, and the impact on circulation will also be lower and lower.
Image source: Weibo @神鱼BTCer
Image source: Weibo @神鱼BTCer
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How to catch the halving market
First of all, we must maintain a reasonable position at this stage, and do not blindly increase leverage, or use more financial derivatives, resulting in a very heavy position. There will be a lot of psychological pressure. Under such circumstances, it is difficult to hold these digital assets for a long time. It may be a little turbulent, and you may run away with a little bad news, or you will be wiped out just after you get rid of the set, and you will miss the excess returns in the later period. up. First of all, the positions should be light. Hold these positions within the limit that you can bear the loss, and hold them for a long time. When the price reaches your psychological price, that is, when it reaches the position you think you will not regret, you can realize it in batches.
Of course, you must keep some bottom positions at any time, that is, no matter what price it rises to, even if it exceeds your psychological price, this bottom position will still not be sold. To prevent some extreme market conditions, like in 2017, everyone felt that 18,000 was too high and would not rise any further. Many people quickly sold off their cars, so the subsequent market conditions had nothing to do with them.
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How should you feel about this halving?
The money we can earn is actually the cyclical money of the entire industry, or the undervalued money brought about when the value of the industry has not been fully explored. , Earn periodic money.
Under such a mentality or view, we need to understand what money should be earned and what money should not be earned, and focus on the big and let go of the small.
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Miners Q&A
01 Will halving lead to a drop in computing power? What impact will it have on the entire market?
If the currency price does not rise sharply during the halving, many mining machines may have to be shut down, the computing power of the entire network will drop sharply, and the return cycle of mining machines will be longer.
Everyone has a clear psychological expectation for the halving, so it has little impact on the overall Bitcoin ecology; in addition, with the limit of nanotechnology and the impact of halving, the iteration of mining machine chips will not be as fast as in the past. The life cycle of the mining machine will be greatly extended, and the investment model of the mining machine will be different from before; the investment income of the mining machine will be relatively stable, and the shape of the mining machine may change, and it may become a component of home appliances. As a result, the group of miners has expanded dramatically, and the ecological participation of Bitcoin has also ushered in an explosion.
02 What impact will the halving have on the cost of miners?
The halving of Bitcoin is a fatal blow to existing miners, and the income is directly reduced by half. If the currency price does not fluctuate violently at this juncture, it may cause the current mining machine, which accounts for about 50% of the electricity cost, to be unable to mine, because its marginal revenue is less than the marginal cost, so it can only choose to shut down. At the same time, this period of time happens to be the time for the upgrade of 16nm mining machines to 7/8nm mining machines, which exacerbates the risk of shutdown of the previous generation of mining machines.
Another thing to note is that although the original block reward for mining will be halved, the mining reward is composed of two parts, the original block reward and the transfer fee, so from the perspective of the transfer fee, if the entire The blockchain can bring rapid development, and then increase a large number of transactions on the chain, so that the transaction fee on the chain will increase, and the impact on the miners will be further reduced, so the mining pool has a very strong motivation to make the blockchain market more People come to use and find more application scenarios.
Image source: Weibo @神鱼BTCer
Image source: Weibo @神鱼BTCer
03 How should miners deal with the halving?
This year's halving is a very big impact on miners and mining machines. Affected by the global economic downturn and the epidemic, there have been large-scale shutdowns before the halving. If the small hydropower stations and traffic in Sichuan have not recovered in May, and the price has not risen significantly after the halving, 70% of the mining machines in the entire network will be in a state of loss, which may lead to mining disasters. This year will be a stage of big reshuffle and test for miners.
Everyone has a clear psychological expectation for the halving. Miners must prepare in advance and do a good job of hedging; if not, then try to find cheaper energy and reduce costs. The key to survival.
