Bitcoin halving is coming this May. What to expect?
Over a decade ago, the Bitcoin code was programmed to rearrange the mining price every four years (after every 210,000 blocks). The next change is due May 2020 and is called “halving”.
Background & Bitcoin halving schedule
Essentially, Bitcoin halving is a block reward reduction. As comes from the name itself, the mining rate is slashed by half regularly.
The halving need is partially driven by Bitcoin’s 21 million upper cap. Making BTC finite brings it closer to gold as an asset. Currently, about 18 million bitcoins have been mined already.
This practice should also eventually lead to a price increase of the most famous cryptocurrency. In theory, the limited supply may trigger higher demand, making BTC more competitive in price terms. At least, previous halving events have preceded big price increases.
Here’s a brief overview of the Bitcoin halving schedule:
- 2009: Bitcoin mining rewards start at 50 BTC per block
- November 28, 2012: The first Bitcoin halving reduces mining rewards to 25 BTC
- July 9, 2016: Second halving takes rewards down to 12.5 BTC
- May 2020: The third halving will see the reward fall to 6.25 BTC.
If we continue the calculations, we’ll see that the last Bitcoin will be mined after the 64th halving event, which should take place around 2140.
When there are no mining rewards available, the participants of this process will benefit solely from transaction fees. After the halving, miners who don’t find it profitable to mine anymore will give up. Most miners will continue to mine and will only sell their bitcoins at a profitable rate, thus increasing Bitcoin’s asking price.
What benefits or pitfalls does halving bring to all the BTC holders? Let’s learn from the experts.
What’s next? Expert opinion
Some of the price predictions seem too far-fetched even to the most optimistic crypto-traders. For instance, Rekt Capital analyzed similar patterns of the BTC price changes around the first two halvings. They drew an analogy and came up with an unbelievable assumption:
Jason Williams, a co-founder and partner in the Morgan Creek Digital went to another extreme having said that halving would have a minimal impact on the bitcoin price due to its predictability.
He believes the crypto-community is already preparing for the upcoming event.
Nevertheless, Grayscale, an investment firm under Digital Currency Group, conducted a survey that showed the opposite results.
Vijay Ayyar, head of Asia for cryptocurrency exchange Luno, agrees that “most normal people are unaware of it, and when the price starts running, the masses will come in as we’ve seen before.” His bet on the price rise is $15,000 – $16,000. That prognosis allows him to stick to the golden middle, expecting a reasonable price increase.
Although many buyers and miners may not prepare at all for the reward reduction, their unawareness won’t necessarily lead to an enormous price surge.
Noelle Acheson, a veteran of company analysis and CoinDesk’s Director of Research, thinks that:
On the other hand, Bitpay Chief Commercial Officer Sonny Singh, whose previous predictions were quite accurate, states that:
In his opinion, the price surge will have other reasons than halving itself.
More market analysts confirm this statement. Geopolitical uncertainty is often mentioned as a contributing factor to the current price increase.
All other top ten cryptocurrencies, excluding stablecoin tether, have also risen even further than bitcoin so far this year.
Perhaps, the coincidence of the US-Iran tension and the upcoming Bitcoin halving has triggered a steady growth pattern we are witnessing today. At the moment of writing the BTC market price is around $7000. Experts believe the end of the bull run is not anywhere near.
According to GlassNode’s data, deposits have been steadily falling since the previous local top of nearly $14,000 in July 2019. As the price has been trending upward during 2020, there has been no visible increase in the volume of deposits reported across exchanges. Surging deposits on crypto exchange platforms have previously been a reasonable indicator of an approaching market top. By this logic, it seems investors aren’t looking to sell just yet.
Among the number of various expert predictions, there are both modest ones claiming the “mother of crypto” will top at $15,000 and more bold estimations raising the market cap to $150,000. Nevertheless, everyone seems to agree that BTC will be on the rise for quite some time, perhaps, till the end of 2020.
Nexo co-founder Antoni Trenchev claimed the main selling point of Bitcoin has evolved over the years.
Trenchev added that the Bitcoin price would reach the $50,000 level if the crypto asset is able to take hold of 10% of the current gold market.
As for the miners (who will be affected the most), Bitcoin halving brings gloomy predictions. Global CEO of the RRMine Bitcoin cloud mining platform Steve Tsou and Ramak J Sedigh, founder and CEO of Plouton Mining, expressed their conviction that small operators will be forced out of the mining business likely passing the baton to giant international companies.