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Here's your simple guide to the bitcoin halving

Bitcoin price over the past 3 months, via WinkDex.
Bitcoin price over the past 3 months, via WinkDex.

On Saturday, July 9, around 1:30pm EST, the bitcoin halving will occur.

What the heck is the bitcoin halving? In simplest terms, for only the second time in the digital currency’s history, the reward that bitcoin miners receive will be cut in half.

To get more in depth: All bitcoin transactions are recorded on the bitcoin blockchain, a public, decentralized, permissionless ledger. The transactions are recorded in bundles, called “blocks,” by “miners” who receive a small reward in bitcoin for mining. This process creates new bitcoins.

Miners currently earn 25 bitcoins per block—at the current bitcoin price, that’s $16,175. But beginning with the mining of the 420,000th block, which is set to happen on Saturday, the reward will go down to 12.5 bitcoins rewarded per block mined.

This will reduce the creation of new bitcoins from 9% down to about 4% per year. It’s an event that people in the bitcoin world have been anticipating for months with great excitement—but also uncertainty.

So, what does this mean for you, Yahoo Finance reader, and for the bitcoin market?

If you don’t own any bitcoin, perhaps nothing at all. But there are signs that the halving could have a major impact on the price. And if it brings the price on another big ride, this could be the right time to get in. Consequently, some experts predict the opposite: that the halving will be an exit event when many speculators get out.

The last time the mining reward was halved, after 210,000 blocks, was on November 28, 2012. The price did nothing significant that day, then saw a slow increase in the weeks that followed, part of a run to the highest price bitcoin has ever seen, above $1,200 one year later. But the post-halving bump was likely due to many different factors, as is typically the case with every bitcoin price hike.

Take the last few months as an example. Just after the Brexit vote, bitcoin saw a clear bump—but the price had already been on a big ride for months before the EU referendum, and many believe it was because of the approaching halving. Bitcoin is up 49% over the last 3 months, and 115% in the past year. (Then again, based on data from Coinbase, Brits bought a lot of bitcoin just before the Brexit happened.)

Every time bitcoin spikes, people like to point to China, the de facto global capital of bitcoin and where the majority of miners are based. But bitcoin is an asset untied to any single country’s economy or currency (much like gold), which means the factors that raise or drop its price are varied and difficult to pinpoint.

In a casual Twitter poll on what the price will do in the wake of the halving, nearly 300 respondents were basically split on whether it will go up, down, or do nothing.

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One group that could be seriously hurt by the halving is miners using older mining machines, whose margins are smaller. (Most miners nowadays are big operations with expensive machines, mostly in China.) If the price drops precipitously, these small-margin miners could be cut out, because mining might become unprofitable for them. If that happens, bitcoin’s hashrate—the speed at which the blockchain is operating—would drop. And that would be bad for the entire bitcoin network.

The only thing you can bank on from bitcoin in the next few weeks after the halving: volatility. But that doesn’t necessarily mean the everyday investor should stay away.

Daniel Roberts is a writer at Yahoo Finance, covering sports business and technology. Follow him on Twitter at @readDanwrite.

Read more:

British bitcoin market sent extraordinary signals before Brexit

The latest Bitcoin price hike is not all about Brexit

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