The Bitcoin Halving Event: What to Expect (Exclusive)
Expert views on the Bitcoin 2020 halving event
At E-Crypto News, we have been understudying the coming trends in 2020 and one of them is the upcoming Bitcoin Halving Event which is definitely going to have a significant amount of impact on the cryptospace. Hence, we reached out to industry experts who gave us their views on what to expect. Here is what they had to say:
Mitesh Shah – Founder & CEO of Omnia Markets Inc.
As a quick overview, miners are rewarded Bitcoin for each block that is mined. Every 4-years, in response to inflation, the rewards are halved. Due to this, we are now approaching an equilibrium in which rewards are just able to cover the costs to mine, which are mainly computer costs and electricity costs. At this point, since miners may no longer experience a profitable return, and in some cases may be experiencing losses, many miners may decide to switch to other chains/coins or cease mining entirely. This would mean that there would be a decrease in new Bitcoins being farmed / circulating the market – various reports state around $60-Million worth; thus, Bitcoin prices may rise or continue to rise in anticipation of this event as it has in the past due to its increase in scarcity/supply.
However, it should be noted that as the prices for Bitcoin rise in anticipation, some miners may remain as they in turn anticipate a decrease in the number of miners so they can receive the rewards. While the number of rewards is decreasing so the miners receive a lesser share, a high price of Bitcoin may serve as enough incentive to keep miners around as long as they receive enough to make a profit for their efforts. Since there are only approximately 3-million Bitcoins left to mine – as it has a 21-million cap limit – with the halving and miners leaving the chain, it will take a significant amount of time to mine the remaining 3-million Bitcoins providing some level of stability in terms of circulation post-halving.
Andy Cheung, Head of Operations at OKEx
While we like to hear any positive predictions for Bitcoin, we do not put much stock in them. We know there is data to suggest Bitcoin can increase in price after a halving, but there is also data to counter that halvings don’t have much material effect on price. OKEx believes the value and power of Bitcoin, as well as blockchain technology, resides in that it is a decentralized asset class free from the oversight of third parties.
Robert Beadles, President, Monarch Token
Currently, it appears the price is baked in, however with mining costs somewhat fixed in many areas, it would appear Bitcoin must increase in value to accommodate mining costs, or that miners must move to new areas with lower costs of mining.
Sean Barger, Managing Director,CPUcoin
There is going to be a shift in the dynamics from mining blocks to transactional fees between holders. I believe this will have an automatic inflationary effect.
Enzo Villani, Chief Strategy Officer, Transform Group
In a rational sense, you would expect that it will rise by some significant percentage points since minting will half. But I predict that major banks, funds and governments will attempt to drive the price down through the media, government actions and other market manipulation, pouring F.U.D. Into the markets. If a global recession hits, it might jump significantly. I have a price target of $17,500 with a ton of volatility. Good time for futures traders!
Tomàs Sallés Technical Analyst – Financial Writer at FXStreet – FXStreet.com (UK)
“Imagine if you could predict the reduction of the supply of a commodity by 50%. As a smart investor, anyone would see a business opportunity.
Now, let’s put ourselves in a situation where that commodity is considered so valuable that people will shelter part of their savings in it. It could be Gold, a Picasso painting or a Ferrari 250 GTO.
What about Bitcoin?
What makes an object or material a store of value is the law of supply and demand. No one, absolutely no one would pay $70 million for a car like the 250 GTO if it weren’t for someone before him who was willing to pay $69.5 million. And before that $69 million. It is a case of a limited offer since only 36 units were ever made.
The Blockchain technology that sustains Bitcoin is constructed on several invariable premises. The first of them dictates that only 21 million can be mined.
Other assumptions state that from time to time, the supply of Bitcoins received by the miners is halved. The impact of this step has direct consequences for Bitcoin’s price.
One of the main characteristics of Bitcoin is its scarcity. When a halving occurs, the impact on the flow of supply is immediate. It is not only a shortage in the total supply but also in the flow of new Bitcoins available annually.
We must also take into account the cost of mining. When supply halves, miners see their costs doubled immediately until new processors allow for some mitigation of that cost increase.
At the time of writing, there are 18,008,250 Bitcoins in circulation, and slightly more than 366,750 will become available until the next halving. According to bitcoinblockhalf.com, there are currently 203 days and 15 hours left for this to happen.
In the two previous halvings, the price evolved to the rise of the explosive form:
– In the first halving (11/28/2012), the Bitcoin was valued at $12 and then leaped to a peak price of $1,163 or 96X.
– The second halving (7/9/2016), Bitcoin was valued at $658 and reached $19,982 or 30X.
– The third halving will occur around May 13, 2020, although we don’t know the starting point and target. (see chart)”
Lance Morginn President of Blockchain Intelligence Group (BIG)
If history tells us anything, we could and should see a significant price jump directly after the halving. Since Bitcoin’s price is based on a perceived value and supply and demand is the age-old formula, naturally all stakeholders will demand more. Another factor not often discussed is the impact miners have on the price. Miners need to sell the cryptocurrency to cover their expenses and if their reward is cut in half, they will be inclined to expect a higher return for their efforts.
What do you think will happen when Bitcoin halves in 2020? Please let us know in the comments below!