The halving of Bitcoin has been ingrained in the crypto asset since its inception, and it is a mechanism that slowly decreases the reward that a Bitcoin miner generates from mining a block. The mining comes from solving cryptographic equations, employing computing power for the processing of each transaction. The resolution of these blocks creates the block on the chain.
As compensation for the work, a specific amount of Bitcoin is provided to miners, which may apply towards the cost of solving the problems. Halving has taken down Bitcoin rewards over the years, and this time would be just like the others. The scarcity of Bitcoin seems to be a major consideration that could alter the future value of the crypto asset. Chief investment officer Alistair Milne of Atlanta Digital Currency Fund believes that the next halving could end up stimulating major gains on Bitcoin within the next year, saying that “it isn’t” already priced.
CEO of Digital Currency Group, Barry Silbert, added to the comments, noting that there are many retail investors that have no idea how the halving even works, and how it will ultimately change Bitcoin’s value. If looking at the history of the other Bitcoin halving events have any indication of what will happen next, then the price of Bitcoin should start moving at about 12 months out from the predicted halving date.
Moon Overlord, the Twitter handle for a major crypto analyst, brought this timing to light in a recent post. With the projected halving set to occur in May 2020, the value changes in Bitcoin would really begin to change in about two months.
People calling for 1K #bitcoin don't realize the halving pump traditionally starts a year ahead of time
The next halving is May 2020, meaning we are only a few months away from the start of the pump
Are we really going to dump another -70% in the next few months? Doubt it
— Moon Overlord (@MoonOverlord) January 23, 2019
There are a few differences between this upcoming halving and others. Previously, as the halving happened, the then-current circulating supply was close to the maximum. However, with the loss of private keys, wallet addresses, and mismanagement of BTC on exchanges, there are millions of BTC that have been lost forever. As anyone in the market knows, loss Bitcoin is next to impossible to retrieve without a hard fork, which has never been considered in the whole decade since Bitcoin was introduced.
A blockchain analytics group named Chainalysis created an estimate in 2017 that there were at least 4 million BTC that have forever been lost and can never be added back into circulation.
At the time of that statement, many experts of the industry were shocked, according to senior economist Kim Grauer. She pointed out that, after explaining how these assets can be considered lost, it becomes “more confusing” to investors and proponents.
Since that evaluation was made about two years ago, it probably is less surprising that even more BTC have been lost, and the available supply of BTC will decrease with the halving. While there will be less available BTC to purchase, the rarity will ultimately push up BTC’s price. Realistically, that means that the monetary value of the BTC block reward may actually increase, even when the number of BTC responds contrarily.