Click here for a great article on the last two halving events and how they impacted Bitcoin's price
Useful table that shows how the block reward has dropped over time and how it is expected to drop in the coming years
When you look at Bitcoin zoomed in, you're not really seeing the full picture. We need to zoom out and look at it in the long scale. Here's a great video that explains why:
Click here for another great video that explains the same concept
The last halving event of 2016 made it even harder for people mining from home to compete with the big data centres running thousands of miners. The reason large scale mining operations can crush the competition is because they can source miners in bulk at a cheaper price and have access to much cheaper power rates (sometimes even as low as 3 cents kWh). These numbers make it incredibly difficult for home miners or those running small mining operations to compete with the big players.
Whilst the halving event of 2016 crushed home miners, the halving event of 2020 is likely to result in the smaller mining operations shutting down. This will result in Bitcoin mining become even more centralised than it already is. This event is likely to play out in favour of the big players. The common saying definitely springs to mind here, "Go big or Go home".
We're proud to announce that against fierce competition from 800+ cryptocurrency hedge funds, Lavaliere Capital has picked up the award for top performing crypto hedge fund for Q4 of 2019. This fund was co-founded by New Mine's founder, Ibrahim Alkurd.
The management of the fund is based in Boca Raton, Florida and it is open only to accredited investors. Lavaliere Capital is still a young fund so it will be interesting to see its development and growth over 2020.
A lot of attention is given to the all time highs (ATHs) when it comes to the price of Bitcoin. The famous all time high of $20,000 is regularly thrown around and many people are on the lookout for when BTC may break this price again. The issue with ATHs is that they usually occur during a "bubble" where market hype drives the price to make new highs. These ATHs are usually short lived and don't really provide a concrete measurement to the value of Bitcoin. A better way to look at BTC's price is by looking at the yearly lows.
By analysing the yearly lows, we can see that BTC's price has been growing strongly year on year. It would not be unwise to expect that the yearly lows will be hitting 5 figure sums within the space of 3-4 years.
After the harsh bear market of 2018, the cryptocurrency market saw healthy gains over 2019. Bitcoin, Ethereum and multiple of the top coins registered positive gains. On the surface, many of the investors within the community are of the opinion that the halving will have a positive impact on BTC’s price. I wanted to run an analysis on the historical impact of the halving on BTC’s price in an attempt to predict how it may influence the price over 2020.
The Bitcoin halving is when the block reward is halved (hence the name). The next halving event will take place around May of 2020 and will see the block reward dropped from 12.5 BTC to 6.25 BTC. The block reward will keep being reduced by 50% every 210,000 blocks until it reaches zero (in about 120 years from now). The math is simple:
210/000 blocks x 10 mins per block / 60 mins per hour / 24 hours per day / 365 days per year
The annual supply of bitcoin with a block reward of 12.5 BTC is 656,250 coins. With a block reward of 6.25 BTC, the annual supply will be 328,125. Logic dictates that if the demand is maintained and the supply is halved, the price should at least double. This next halving event will see the inflation rate of Bitcoin drop to below the inflation rate of the United States. The inflation rate with a block reward of 6.25 BTC is 1.79% annually. This is well below the USA’s inflation rate of 2.28% that was registered over 2019.
The first halving happened in November 2012 where the price of one BTC was $12.31. Historical data shows that an upward trend began to form approximately one year prior to the halving. The “pre-halving” uptrend saw BTC rise by as much as +340%. The price of BTC was registering gains in anticipation of the supply being dropped. Almost immediately after this event, BTC registered gains of around 8000% over a year long period to reach $1000 in November 2013. This strong price was short lived as the infamous Mt. Gox hack occurred and the market entered a 2-year long bear run.
The second halving event occurred on July 2016 where the block reward dropped from 25 to 12.5 BTC. Again, the market saw an upward trend roughly 9 months prior to the second halving. During these 9 months, BTC registered gains of 110% where the price of one BTC was $650 at the time of the second halving in July 2016. This halving was followed by strong gains over an 18-month period where BTC saw a rise of 2800%. The height of the peak was hit in December of 2017 where one BTC was trading at $20k. Such a high rise was then followed by a drastic fall, similar to the bear market that came after the bull run of 2013. Bitcoin dropped nearly 80% over a 12-month period where it hit a bottom of around $3000 in December 2018.
The third halving event is just around the corner and Bitcoin seems to be following a similar pattern to the last 2 halving events. There has been a healthy appreciation of Bitcoin’s price over 2019 with gains of around 200%. The market seems to be factoring in the halving event due to take place in mid-2020. As history seems to be repeating itself, we can expect a new ATH within 12-18 months following the halving event.
Unfortunately, markets are not this simple, and the cryptocurrency market can be very unpredictable. We also need to take into account that the cryptocurrency market during the last two halving events was much less mature than it is now. Four years ago, the crypto derivatives markets were in their infancy and there was less institutional money involved. Time will tell how this all plays out.