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Bitcoin halving and consequences

Jan 19, 2020
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What to note on bitcoin halving

Defining bitcoin halving

 

What is bitcoin halving? Bitcoin halving actually refers to a cut in the network’s issuance rate. So it means the miners will receive half as much BTC for validating a block than before this event. Through this event, bitcoin cryptocurrency entering into circulation will be reduced. Simultaneously, mining cost for securing the network increase. This act as  in-built deflationary tool.

Bitcoin halving happens at interval of 210,000 blocks. This is roughly once every 4 years. At moment, bitcoin miners receive 12.5 BTC each time they mine a block successfully. For the next halving, they will receive only 6.25 BTC.

 

halving in 2020

 

Bitcoin experienced first halving before and that is in November 2012. It is during a time where majority of people worldwide have never heard of bitcoin. There will be another bitcoin halving possible at May 2020. It is exciting this time as everyone are aware of bitcoin existence and coupled with much institutional interest, will bitcoin price explode and upwards to the moon?

 

price surge

It should be note that bitcoin protocol was programmed with hard limit of 21 million in order to keep inflation in control. new bitcoins shall enter this sphere in a controlled manner as an incentive for the miners.

As of January, there are still 14,625 blocks left until the halving.

 

bitcoin halving

 

Probable consequences of halving

 

There will be or without effect to bitcoin price after the halving. many crypto experts predict a huge rally in bitcoin price- with some predicting it will reach $400,000 per bitcoin, while the more moderate ones predict $300,000.

Companies that do bitcoin mining will be affected greatly. Miners with low mining efficiency are forced to pause and re-evaluate their business operation. Big international companies with advance machines and cheaper source of electricity will dominate the market for mining.

Many traders already consider buying the tokens to sell them after the halving. Disasters around the world can also made gold and bitcoin prices to rise.

 

The pessimistic

 

It should be noted that for Meltem Demirors from Coinshares, he thinks the price will not go up. Investors sometimes goes the opposite to what is expected. He thinks the majority of the investors will use robust derivatives to trade and not the asset itself. This could means that CME and Bitcoin-related derivatives (form Bakkt) may receive the money but with bitcoin’s price dropping. He also notes that in 2017, CME launched its Bitcoin futures. The price actually went up to 20,000 before the 2018 bear market.

Another thing to consider is how litecoin go through halving process. It’s price surge BEFORE the halving.To the disappointment of many, price of litecoin actually fall when it is halved.

Litecoin’s lackluster price performance since just before its halving to now suggests two things — first is that market is becoming more mature and secondly, traders are less sensitive to hype.

This may mean demand for LTC has drifted which may offset the impact of the drop in supply growth from its halving. There is little interest on litecoin among institutional investors.

 

bitcoin mining

 

Further Analysis

 

One thing miners will watch out for is the bitcoin price right after the halving. It will determine whether the price will aggressively increase which will affects whether it is worthwhile to focus to mine. Interest in mining will spike if value of bitcoin enters $20,000.

Also to note that despite probability on side of the bulls, there isn’t any concrete evidence to show halving will cause bullish events. If the price not surging soon after the halving and fee revenue continuing at a similar level, miners have to endure a revenue halving since block subsidies contribute over 90% of their overall revenue.

This can lead miners next to sell a larger part of incoming Bitcoin supply to meet their expenses. Which is to reduce the effect of a supply contraction caused by the halving.

It is really for everyone to guess.

 

Google search on bitcoin halving

 

So does bitcoin halving have people scrabble to search for the term? Through search engine’s Google Trends feature, it shows queries on the term “bitcoin halving” have doubled this month from December levels to the highest since the last such event in 2016. A greater public interest in searches can be a catalyst for higher price in 2020. The awareness is slowly growing to new people which is a good sign.

The last halving that happens in 2016, the price for bitcoin doubled that year and then surged by 13 times the following year. Bitcoin is surely a very interesting prospect to buy as investment considering that it had outperformed traditional assets like equities.

Bitcoin had a price jump of 94 percent in 2019. It is remarkable as this was roughly triple last year’s gains in the Standard & Poor’s 500 Index of large U.S. stocks. This is surely the best time to buy.

 


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