It is a decentralized digital currency without a central bank or single administrator that can be sent from user to user on the peer-to-peer bitcoin network without the need for intermediaries.
Transactions are verified by network nodes through cryptography and recorded in a public distributed ledger called a blockchain. Bitcoin was invented in 2008 by an unknown person or group of people using the name Satoshi Nakamoto and started in 2009 when its source code was released as open-source software.:ch. 1 Bitcoins are created as a reward for a process known as mining. They can be exchanged for other currencies, products, and services. Research produced by University of Cambridge estimates that in 2017, there were 2.9 to 5.8 million unique users using a cryptocurrency wallet, most of them using bitcoin.
Bitcoin has been criticized for its use in illegal transactions, its high electricity consumption, price volatility, and thefts from exchanges. Some economists, including several Nobel laureates, have characterized it as a speculative bubble. Bitcoin has also been used as an investment, although several regulatory agencies have issued investor alerts about bitcoin.
The first video on top of this page goes over what Bitcoin halving is all about, re-watch it before reading the content below to refresh your memory.
Bitcoin Halving Could Leave Price at $20K-$50K, Hedge Fund Manager Says
Bitcoin's scheduled mining-reward halving in May 2020 could leave prices for the cryptocurrency in a range between $20,000 and $50,000, according to a new estimate.
The projection by Charles Hwang, managing member of the hedge fund Lightning Capital and an adjunct professor at Baruch College, represents a multiple of bitcoin's current price around $7,500.
Hwang wrote in a post on Medium that he assumed demand holds steady at 633,000 bitcoin through 2021, while mining rewards drop to 328,500 bitcoin a year from the current pace of 657,000 a year.
"This sudden shift in the supply curve will most likely be the catalyst for the next bitcoin bull run," Hwang wrote in the post.
Lightning Capital is a small hedge fund, with roughly $500,000 of assets, but Hwang's prediction adds to a growing number of estimates from investors and analysts trying to gauge the potential impact of the halving - where the number of bitcoin mining rewards created every 10 minutes is sliced in half. The cut happens every four years, in accordance with the cryptocurrency's 11-year-old design.
Some market observers say bitcoin's first two halvings in 2012 and 2016 helped fuel big rallies in bitcoin's price, and the German bank BayernLB predicted earlier this year that the 2020 halving could drive the price as high as $90,000. Other analysts argue that, since investors know the event is coming, it theoretically should already be baked into bitcoin's price.
Hwang told CoinDesk in an interview that he considered his demand estimate conservative. He projects that 82,000 bitcoin purchases could come from online dark markets while 546,000 bitcoin could be bought through over-the-counter provider LocalBitcoins.
"There have been many people who claim there is no demand for bitcoin," Hwang said. "However, the data from LocalBitcoins and dark markets demonstrates people are purchasing bitcoin."
Hwang wrote in his Medium post that his research shouldn't be construed as investment advice.