A major event in the Bitcoin timeline is scheduled more than six months out, but the number of articles already speculating the consequences is growing in geometric terms. The word “halving” will soon find its way into our daily lexicon, if it has not already, but Bitcoin enthusiasts are well acquainted with what will happen in May of next year. The rewards to miners will be cut in half, thereby creating less supply, and, hopefully, the expanding demand for the world’s favorite digital asset will shoot prices to the moon.
We have written about this event on several occasions, as far back as last August, but it seems to be a popular topic these days. As we reported in August: “For those that missed the email, a “halving” event occurs every four years for Bitcoin. During its first four years of existence, 50 bitcoins were issued every ten minutes, a mining “reward”, so to speak. Every four years, this amount is cut in half, which has earned the name of a “halving event”. As of 17 May 2020, the mining reward will be cut in half again, from its present amount of 12.5, down to 6.25.”
Your first reaction may be that miners will lose out, due to this programmed cut in their revenues, but you need not shed many tears on their behalf. If you do the math, i.e., 6.25X6X24X365X$9,200, then the potential funds on the table for miners on an annual basis comes out somewhere just above $3 billion, based on today’s prices. But what about prices going to the moon? The Bitcoin faithful usually swear by this chart:
There are several versions of this annotated history of Bitcoin price behavior over the long haul, but this one from NewsBTC is one of the better presentations. As you can see, the repeating patterns before and after prior halving events seem eerily similar, almost as if someone deliberately re-stated history to make everything look so “perfect”.
The wishful thinkers among crypto advocates salivate when they see the “blue” bull market designations and what that might mean for Bitcoin valuations down the line. As the chart denotes, Bitcoin is currently in an “Expansion” phase, soon to be replaced by “Reaccumulation”. A rabid group of analysts have already jumped all over this diagram and scribbled in their expectations for 2020 and beyond. The forecast that appears to be the general consensus of these “rose-colored-glasses” folks is roughly $55,000, just in case you happen to see this figure bandied about over the next six months.
The mining industry recently opined on this topic at a confab of the group, but their thoughts were nowhere near this level of exuberance. Most mining insiders, including the CEO of Bitmain, the largest mining consortium on the planet, believe that the expected run up in prices, so decisively predicted by the above chart, are already baked into BTC prices. In fact, they attribute the rally during the first half of 2019 to this phenomenon. They are more concerned about greater competitive pressure in 2020.
After Bitcoin’s recent surge from the low $7,000s to above $10,000 and now down to $9,200 after profit taking, the number of positive halving projections appearing in the financial press has also surged. Confidence is running high again, but the world is a different place this time around. Yes, there is greater awareness and participation by large institutional investors, but halving is no longer a strange event that no one has ever heard of. One given is that miners will be under economic pressure. If the “pinch” is too severe and they start liquidating reserves, we could see BTC collapse. The jury is out.
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Bitcoin halving event next May generating active debate on consequences was first posted on October 31, 2019 at 3:13 pm.