The so-called bitcoin halving refers to the event in which the reward for each block mined in the BTC network is halved – this time to 6.25 BTC. The next such event will take place in May 2020 – and in the past “halvings” have always been associated with significant price increases.
Some are now suggesting that speculation has already effectively “priced in” any future halving increases. Others suggest that the decline in BTC supply with constant demand will lead to price increases.
Bitcoin halving: the math behind it
The math behind the prediction is relatively simple. The two companies GBTC and Square currently have around 25 percent of the mined material. Assuming that this volume remains static after halving, the companies would hold 50 percent.
If half of all BTC is absorbed by these two companies, the demand for the coin should increase significantly. With the demand from other companies like Coinbase and general consumer demand, Bitcoin prices could react positively.
Bitcoin should react positively after halving – if only because of the relationship between supply and demand.
Bitcoin rises after halving – arguments against it
However, the thesis ignores a variety of other questions.
– First, the assumption that the mined quantities are always held by the miners could be erroneous. Miners often sell part of their block bonuses – especially when the market is running.
– Second, the current Bitcoin market differs significantly from the market of earlier halving. An important change is the introduction of futures trading. Futures traders do not need actual bitcoins to change hands or hold them. For this reason, the volume of mined BTCs is becoming less important.
– Thirdly, the amount of the funded volume is extremely small compared to the total trading volume. More than two million Bitcoin are traded every day.
The change in block premium from 12.5 BTC to 6.25 is a tiny change in the total trading volume. Halving to date has occurred in times of a much lower total volume. So the events so far have had a far greater impact.
What will happen?
Both sides argue well and the future remains unclear. Bitcoin’s next halving will surely draw attention to the market-leading cryptocurrency and thus bring about some volume increases. However, other factors could cause BTC to remain stable.
If Bitcoin halving is already priced in, the market will stagnate and then likely decline. However, if the event causes an increase in acceptance and buying pressure, the price can go up – dramatically.