Next Bitcoin Halving Predicted To Significantly Explode Asset’s Value
The Bitcoin halving is something that happens after every 210,000 blocks. This is approximately a four-year interval and sees the block reward Bitcoin miners receive for every block, cut by exactly half. This directly means that the production of Bitcoin is significantly reduced. This is one way Satoshi Nakamoto, founder of Bitcoin, ensured some sanity and avoided inflation, in an otherwise decentralized network.
The next halving is expected to happen next year in May. Currently, the block reward for miners after every block is 12.5 BTC. After May 2020, this will be reduced to 6.25 BTC. It has been noted that after a few more halvings, Bitcoin mining might not be worth it anymore for the miners. But apart from that, what do these halvings do for the price? How are the prices affected?
Bitcoin Halvings and Pricing
Since Bitcoin was launched, there have been two halvings. In November 2012, the first one occurred and its effect was quite interesting. Within twelve months after that November, the price of Bitcoin did what can’t even be qualified as a surge as it shot up to about $1,000 from $10. This was a move of around 10,000%, one of the biggest moves cryptocurrency has ever seen.
Four years after that, as expected, there was another halving this time in July of 2016. Within one year also, Bitcoin successfully reached its all-time high of almost $20,000 with the rally beginning even before the halving day.
Due to these, it is almost ridiculous for anyone to assume that the next halving will not also have a significant effect on the value of the asset. Also, based on the traditional laws of supply and demand, the next halving will, like the others, create some scarcity that will shoot the price up. It’s interesting to note that this effect was probably deliberately anticipated by Satoshi Nakamoto from the start. According to a letter by Satoshi:
“The fact that new coins are produced means the money supply increases by a planned amount, but this does not necessarily result in inflation. If the supply of money increases at the same rate that the number of people using it increases, prices remain stable. If it does not increase as fast as demand, there will be deflation and early holders of money will see its value increase.”
Bitcoin Will Surge………….Or Will It?
On the heels of the recent Bitcoin price rally, many experts and analysts have predicted (even without the halving in mind) that Bitcoin will still surge further before the year is over. At the time of writing, Bitcoin is around $8,600 and even almost hit $9,000 a few hours ago. If this trajectory could possibly continue throughout this year and into next year, then next year’s expected price explosion would do wonders for the market.
Many people who are part of the crypto community (and aren’t even experts) are more than sure that the halving will do great for the asset. A recent poll conducted by Bloomberg on Twitter saw more than 60% of over 2,500 respondents believe that Bitcoin will increase towards the halving and continue after.
A firm believer is the co-founder of Morgan Creek Digital, Anthony Pompliano. The popular enthusiast has expressed a longing for the event, insinuating that it will push prices very high.
According to him:
“Imagine if daily printing of US dollars was suddenly cut in half forever. Bankers would be FOMOing even though USD isn't a scarce asset.
Now imagine what they're going to do when the daily Bitcoin supply is cut in half for one of the scarcest assets in the world.
I can't wait.”
Another Bitcoin bull, Brian Kelly also thinks that the halving will have an interesting effect on the price. Kelly, who is the founder of BKCM Capital, recently said
“You generally have a rally a year into it, and a year out of it. And so we’re just at the beginning of that stage.”
However, not everyone has a bullish opinion. Kyle Samani, the co-founder of Multicoin Capital Management, believes that halvings are becoming a lot less important. According to him:
“The first halvening brought inflation from 40% to 20%. The second from 20% to 10%. The next halvening is going to reduce it from about 3.8% to 1.9%. On an absolute basis, each halvening is becoming increasingly less relevant.”