In a recent article written by Pascal Thellman, the CMO at Bounty0x, he talks about Bitcoin’s halving and how it can affect the market during 2019. Every single time that Bitcoin’s network experiences a halving, its inflation is algorithmically reduced by 50%. This is something that will have an important impact on Bitcoin’s price.
According to Mr. Thellman, Bitcoin increases in price the year before the halving. The next inflation reduction is expected to take place in May 2020. This is why it is important for investors to pay close attention to this issue. Since the halving starts getting priced a year ahead of the halving, the market could bottom as soon as early 2019.
Thellman wrote about gold and how it works as a store of value. He mentions that it has an inflation rate that oscillates between 2% and 3% and that its entire supply can easily fit in just an Olympic Swimming Pool. This means that gold is a relatively scarce and durable asset. It currently has a $7 trillion market capitalization.
Bitcoin (BTC) has an inflation rate of approximately 3.8% per year. However, when the next block reward will be reduced, Bitcoin will have a 1.8% inflation rate per year. In this way, Thellman explains that the most popular digital currency will be a harder form of money than gold.
In this way, Bitcoin could become a very interesting asset for banks and other financial institutions after 2020. Thellman says that Bitcoin will evolve into an asset that will have all the qualities that large institutions and central banks look for in a reserve asset.
He kept writing that Bitcoin and virtual currencies experience the effect known as ‘Buy the rumour, sell the news.’ In general, several assets have been affected by it, but in virtual currencies, this is more visible and real. This is something that can be seen when Bitcoin futures market were launched back in 2017 via the Chicago Mercantile Exchange (CME) and the Chicago Boards Options Exchange (CBOE). At that time, Bitcoin reached $20,000 and then plummetted down to $3,200 a few weeks ago.
This pattern can also be seen some time before the halving. For example, in November 2011, a year before the first halving, Bitcoin started a new rally that ended the day after the halving after increasing 300%. In July 2015 happened the same just a year before the second halving.
At the moment, miners are earning 12.5 BTC per block. That makes 1,800 per day. In general, some of these coins are sold at the market price in order to pay for mining costs and lock their profit. However, once the next halving will take place, miners will only earn 900 BTC a day, reducing Bitcoin supply.
According to Thellman, it is necessary to start thinking about the next halving being 18 months away from it. After it, the effect in the network could be very positive.