Daniel Masters is the former head of energy trading at JP Morgan and the director of the Jersey-based hedge fund, Global Advisors Bitcoin Investment Fund Plc.
In this opinion article, Masters discusses the upcoming halving of rewards on the bitcoin network, speculating on how this may impact the price of the digital currency this year. 28th November, 2012 was a slow news day. There was a lunar eclipse, the second that year, and it was the first day since 1990 that the NYPD reported that no one was shot, stabbed or slashed in New York. There wasn’t much to report. And while journalists around the world searched for a scoop, one small story went uncovered – the reward for mining a block on the bitcoin blockchain had just halved.
Commencing in 9th January, 2009 when the bitcoin blockchain initiated, each and every one of the 209,999 blocks mined – created at a rate of approximately one every 10 minutes, in an uninterrupted 24/7 operation – had attracted a new, autonomous creation by the network itself of 50 new, never before seen, bitcoin.
A lot had changed since 2009. The first block mined had one transaction (the special "coinbase" transaction that captures the reward) and no other activity. By 2012, the network size and activity had grown significantly, and there were 543 transactions in the "pre-halving" block.
The next block mined, at a height of precisely 210,000 blocks, as codified years earlier by Satoshi Nakamoto, had a 25 bitcoin reward.
So what?
Nothing much happened. However, a few months later the value of a bitcoin increased dramatically. Prices had been steadily increasing as the halving approached, they ended 2011 at $7, and rose to $11 by September, 2012.
The high tick by April 2013 was $259. Halving expected Needless to say, bitcoin has demonstrated stomach-churning […]
