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Impending Bitcoin Future after Halving Event

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Ingle Jayashree

CBW -External Analyst

Aug, 26 2020

Aug, 26 2020

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The most anticipated event of Bitcoin Halving is at the doorsteps on 12 May 2020. After every 210,000 blocks, or roughly once in four years this event occurs. This will be the third halving event so far and during this event, mining rewards will be cut down to half i.e. the supply of the new coins mined will be cut down by 50 %.

Currently, the reward is 12.5BTC/block and during the halving event on 12 May, it will reduce to 6.25BTC.

Though opinions are divided over the price rise of Bitcoin after halving, With 21 million finite supply, Bitcoin is definitely on its way towards massive mainstream adoption.

Amidst the positive and negative speculations surfacing around, two narratives are doing more rounds. 

Bitcoin price might witness a boom or another possibility is that the Bitcoin might become more precious like gold due to scarcity and stability factors.

But first, let’s delve into why halving is done?

Why Halving is done?

The inventor of Bitcoin Satoshi Nakamoto believed that scarcity could create more value of the asset. Thus halving is done to maintain the value of Bitcoin and to balance of demand and supply stock of Bitcoin. Pondering over the past activities, we can surely conclude that the halvings have always had a positive effect on the price of Bitcoin. And, post the event, Bitcoin has achieved the peak price.

Bitcoin will achieve new highs after this Halving?

After the past two halving events, Bitcoin price has been escalated by thousands of percentage points and thus halvings have become the catalyst for Bitcoin Bull runs.

So observing this past record, observers are expecting new records of price hike after the halving. Some are hoping to reach it to $250,000 at the end of this year and approximately $288,000 in the next four years. Some are envisioning it to reach $ 1 million in the next few years.

Speculations: Post halving  

There is a growing belief among the Bitcoin investors that Bitcoin will emerge as an inflation Hedge – ‘Digital Gold ‘. This will work as a catalyst in determining the Bitcoin price. At the current issuance rate, Bitcoins are produced 1800 a day as a reward to the miners which is estimated worth of $5.6 billion a year. This rate will be dropped to half at 900 Bitcoins a day and so the annual demand from new investors will apparently have to exceed $2.8 billion to maintain the upward price graph.

Though few challenges can be perceived while presuming this all-well picture. Though the number of retail investors is increasing at the exchanges, the surge is not as high in late 2017 when the Bull Run was massively led by retail investors.

Also, as the Bitcoin halving will cut down the revenue of retail miners to half, they may charge more fees which will make the network more expensive to use. The reduction in revenue might minimize their interest of the miners and they might drop off the network, which can possibly transfer the mining control in the hands of large mining farms with heavy rig equipment. This control of mining by few groups may harm the security of the network.

Simultaneously the fees of the transactions are going up due to growth in a number of transactions at the exchanges.

How the Scarcity will help Bitcoin post halving?

Market analysts predict that Bitcoin will preserve its place in the world economy by its scarcity. This is similar to gold metal which has a predictable limited supply that has made it a safe haven for investment. Unlike gold, Bitcoin is easier and less costly to transfer across the borders. The elemental scarcity of Bitcoins will definitely make it a popular option for investment.

As the world governments are pumping trillions of fiat money to stabilize the dwindling economies due to corona crisis, most probably, Bitcoin will emerge as an alternative promising option for investment post halving. 


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Ingle Jayashree

CBW - External Analyst

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