What’s the Magic Behind the 2020 Bitcoin Halving? How the BTC Value and Volatility
Bitcoin halving has been a major topic of conversation in the industry lately, despite still being 471 days away. The milestone is worrisome amongst miners, who will reduce their overall reward as the limited supply dwindles, but a recent article from NewsBTC indicates that Bitcoin itself will flourish.
With the halving, Bitcoin will become less inflationary and will instead increase in value.
What Will Happen To Bitcoin?
According to a counter at https://www.bitcoinblockhalf.com/, the halvening of Bitcoin is 471 days away, placing it on May 24th by the current calculations. Over 83% of the original 17.5 million Bitcoin in circulation have been mined, and the algorithm automatically halves the block rewards after each 210,000 are mined.
Presently, the reward stands at 12.5 BTC, and the halving will take it down to 6.25 BTC.
Right now, 1,800 Bitcoins are created daily, and the inflation rate is 3.82%. The halving even will cause the daily production of Bitcoins to go down to 900, and the inflation goes down to 1.8%. The Federal Reserve has target 2% as the inflationary target but dipping below that amount (as Bitcoin will) makes it less inflationary than the US economy.
With the low inflationary rate, experts believe that people will be less likely to spend it, especially considering that it will dip below the current economy’s inflation.
Many websites have compared the inflation rate to the US economy, based on the last 100 years. The Bureau of Labor Statistics consumer price index says that the value of the dollar has reduced, and prices in 2019 have risen by 2,900% since 1860.
Bitcoin has become labeled “hard money,” which is similar to gold, for its deflationary monetary policy. Gold also has a low inflationary rate as a commodity and it has become a reserve asset for the world, holding a $7 trillion market cap.
Possible Bull Run?
Considering how Bitcoiners are expected to start holding onto their wealth after the halving, rather than selling as some investors have, there are multiple analysts that see this event as the catalyst for a bull run. Investors can find advice all over the internet about accumulating more Bitcoin as the event nears while they can.
The last halving event happened in 2016, which proved to be a bullish year as BTC passed $1,000 in value for the first time, and it has yet to dip below that milestone ever since. Perhaps the same will be true of the next bull run, though the industry has come quite a long way since that first push above $1,000.
Could it be the forward momentum that the industry needs to climb back to the $20,000 mark it almost reached before the current bull market?