Bitcoin-derived networks typically adopt the halving process, or 'Halvening,' an event meticulously set to trim the block rewards miners receive for maintaining the network by half.
Notably then, Bitcoin Cash Bitcoin Cash (BCH), the foremost branch from Bitcoin (BTC) at present, recently experienced its maiden halving. Yet, given the current landscape of the BCH market, especially its price fluctuations, this groundbreaking event has cast an elusive shadow over the future prospects for all parties invested.
The reasoning? If the BCH price doesn't see a rapid and significant rise soon, the halving could basically mean a 50% pay decrease for the blockchain's miners, nudging many to abandon ship, which, in the larger scheme of things, might bring down the network's hash rate and subsequently the BCH price.
Profits Cut in Two?
On Wednesday, April 8th, the first Bitcoin Cash halving occurred at block number 630,000. The planned phenomenon axed the network’s block rewards from 12.5 to 6.25 BCH — or roughly $3,325 USD to $1,662.50 with the BCH price being $266 at the time of writing.
The halving of Bitcoin Cash is a legacy from its contentious split from Bitcoin back in August 2017, when proponents decided to fork off, ensuring they could manage their own Bitcoin version along with on-chain scaling involving 'big blocks' larger than the traditional 1-2 MB.
With that said, Satoshi Nakamoto The initial idea behind the halving was as a means to maneuver the bitcoin inflation rate towards zero over time, leading to a fully deflationary state powered purely by transaction fees, meaning that eventually, bitcoins would be generated entirely internally rather than relying on block rewards.
However, this system's ideal functioning is contingent on sustained growth. For instance, the Bitcoin blockchain has seen two instances of halving, between which the bitcoin value appreciated sufficiently over eight years, keeping mining a profitable venture.
On the flip side are projects like Litecoin Litecoin, having its own halving back in August 2019, saw its value tumble from $100 to $50 within a quarter. As block rewards tailed off without a compensatory increase in LTC's price, miners shut down operations and liquidated their holdings.
A broader view suggests that Bitcoin Cash's initial halving might unfold similarly to Litecoin's previous one. In the months leading to this event, BCH miners earned nearly $13.5 million from block rewards; now, post-halving, should the BCH price hover around or decrease from its standing value, miners' earnings could plunge to half or even less, while dealing with the same operational expenses.
Spencer Noon from DTC Capital candidly believes 'The Halvening spells bearish outcomes for BCH,' said He remarked on April 8th, following it up with, 'Miners don't operate for nothing.'
What Comes Next?
In a scenario where BCH's price rises spectacularly soon, any challenges related to post-halving might be navigated smoothly for Bitcoin Cash over both the short and mid-term.
But given the currently bleak global economic state - compounded by COVID-19's persistent implications - there's little optimism for a significant rally. Should any short-lived spikes happen, they might merely be temporary upswings against a backdrop of broader economic challenges.
In essence, the only viable remedy price-wise would be a steady upward trend. Alternatively, the BCH fee market could step in to offset smaller block rewards, although current BCH fees fall far short of compensating for the reward losses post-halving. It's unlikely this will shift in the foreseeable future, suggesting potential struggles ahead before any improvement for Bitcoin Cash.
