A major technical event known as bitcoin “halving” or “halvening” has arrived in the cryptocurrency market. Bitcoin is a decentralized cryptocurrency, governed by code and supported by a technology known as blockchain.
Miners in the world of bitcoin generally compete with each other with the help of specialized computers to solve complicated mathematical problems to validate bitcoin transactions. Whichever miner wins the competition receives newly-minted bitcoin. And all such mining activities happen in blocks, which is primarily a group of transactions fused into one.
Now, these miners generally receive 12.5 bitcoin per block mined. But that was almost half of 25 bitcoins in 2012. What’s more, halving of bitcoin is expected to happen on May 12, and the reward per miner will be trimmed to 6.25 new bitcoin or approximately $55,000 at the current bitcoin price.
But will the halving boost the price of bitcoin? Since bitcoin halving tightens its supply, it creates a level of scarcity that propels its prices. If we go back to the 2012 halving, bitcoin prices picked up pace in the months that follow, with price of bitcoin surging from $2 to $1,031 a year later, highlighting a whopping 51,000% jump. Similarly, at the time of 2016 halving, bitcoin prices climbed from $650 to $2,518 a year later.
By the way, bitcoin has done fairly well amid the coronavirus crisis. Since Mar 16, bitcoin has soared 84%, while the broader S&P 500 is only up 24%. On a year-to-date basis, bitcoin is up 22%.
Bitcoin’s price has gone up as it acts as a hedge against any economic slowdown. Needless to say, the coronavirus outbreak has weighed on corporate profits and hampered economic growth, with many expecting a recession in the near term. The virus is infecting thousands of people worldwide, disrupting supply chains and retraining movement between countries. Governments across the globe are struggling to control this health crisis and resorting to lockdowns to check the spread of the virus.
To top it, several Wall Street bigwigs are showing keen interest in cryptocurrencies and blockchain technology. And this bullish approach toward bitcoin is surely driving digital assets. For instance, JPMorgan Chase & Co. (
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) has introduced JPM Coin, which will be helpful in handling digital settlements.
3 Stocks to Gain From the Bitcoin Run
If you are looking to tap the rising bitcoin trend, you may take a look at the following companies that are making use of bitcoin and technologies that support it, including blockchain.
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) , incidentally, is facing stiff competition from Amazon.com, Inc. (
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) in the cloud computing space. As a result, the tech behemoth has launched a fully-managed blockchain service, integrated with Azure Active Directory.
Microsoft's fiscal third-quarter results benefited from momentum in Azure, impressive Teams user growth led by coronavirus-induced work-from-home wave and uptick in Surface devices.
PayPal Holdings, Inc
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) , a leader in digital payment processes, sealed a deal with three major bitcoin payment processors, BitPay, GoCoin and Coinbase, to help PayPal merchants accept bitcoin as a mode of payment.
PayPal’s first-quarter results were driven by robust growth in total payments volume owing to increasing net new active accounts. Moreover, customer engagement on the company’s platform has strengthened.
The company, currently, has a Zacks Rank #3 (Hold). The company’s expected earnings growth rate for the current and next year is 7.1% and 22%, respectively.
International Business Machines Corporation
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) has been one of the early providers of the blockchain technology. Broad-based availability of the IBM Blockchain World Wire — a blockchain-driven global payments network — have been driving the company’s performance in the past.
Expanding product portfolio, accretive acquisitions, strong free cash flow generating ability and aggressive share buyback are some of the positives.
The company, currently, has a Zacks Rank #3. The company’s expected earnings growth rate for the next quarter and year is 2.6% and 7.5%, respectively.
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