Bitcoin Cash Halving Caused Miner Exodus and Profitability Decline

Fiat currency has often been beset with inflation and, in rare cases, deflation. The former is understandable, but the latter rarely is, given that it is difficult to see how a currency could be so much in circulation that it loses value.

However, deciding not to take any chances, Satoshi Nakamoto coded an event called “halving” in the blockchain protocol. It reduces miners' rewards by 50% to prevent too many coins in circulation.

In this article, we’ll look more into halving and examine its effects on Bitcoin Cash.

Brief Crypto-Economic Theory to Understand BTC Halving

To better understand what happens to cryptos upon halving, we’ll use BTC as a case study.

• Bitcoin has to be created through a process known as mining. This coin has the potential to inflate, and this inflationary ability will always be there until the coins in circulation reach the 21 million mark.
• To ensure that BTC does not become too many at the hands of users (remember that rarity is key), it is halved every four years — meaning that the rate at which new coins are released is slashed into two every 1460 days.

As a result of this, the availability of BTC is synthetically shortened, thereby increasing its value.

Effects of Crypto Halving

Halving a crypto coin has consequences on three categories of people:

• Regular Users: There is hardly a significant impact on your current portfolio. You can continue its use as you’ve always done.
• Miners: There can be negative impacts, as mining costs are always higher than the previous time, and returns on investments are lower.
• Traders: The halving of a coin is often the appropriate time to increase the price at which you sell.

Summing up the impacts, it's obvious that if you are a regular user or trader there is nothing to be worried about, but if you are a miner you should think twice about the profitability of this business after halving.

Bitcoin Cash Halving and Its Consequences

The first halving event of a coin is always iconic and decisive. This is because it helps investors gain foresight into how impactful consequent halving events will be.

The Effects of the First Bitcoin Cash Halving

• Reduction in Profitability: The halving of Bitcoin Cash coincided with a decline in its value. It is unclear whether this fall was the direct consequence of the halving or the hard fork.
• The Miner Exodus: The reduction in the rewards to be gained from halving Bitcoin Cash (when it was yet to become widely accepted) was only going to end one way. Knowing that they had little to gain for their resources, many miners abandoned BCH for BTC and BSV (which share the same algorithm).
• No Significant Growth in Price: The lack of considerable increase in the value of BCH after its first halving is one of the reasons miners called it quits.

Obviously, Bitcoin Cash halving did not have a major impact on the growth of the coin — as BTC always does. This has led experts to deduce and suggest that Bitcoin events are more likely to affect Bitcoin Cash than its halving events. Thus, it's important to use the BCH to BTC calculator from Godex to know the actual rates.

Final Conclusion

Halving was included in the first crypto protocol to ensure that coins like BTC, BCH, and BSV are never too heavy in circulation. Unlike other coins, however, the first BCH mining didn’t have significant impacts — although absolute judgment shouldn’t be made on this solely. After all, Bitcoin’s meteoric growth didn’t happen immediately after its first halving.

Experts conclude that BTC-associated events will influence the growth and price of BCH more than its subsequent halving events. So, you may check actual BCH to BTC rates on the Godex platform.