The block reward will be halved very soon, which means that mining profit will also decrease. A sea of articles has already been written on this subject, and all of them are full of comments by “sky-high” experts. We interviewed active members of the crypto community about what they personally expect from halving. What will be the consequences of halving the reward for each block mined? Will the history of the bull market, that happened in past years, be repeated?
BTC has changed a lot since the last halving of 2016: futures and options appeared, and many investors began to rank it as assets of “preserving value” during the crisis. But the main change is that now, for the first time in the history of bitcoin, a new halving is preceded by a global crisis due to the coronavirus COVID-19 pandemic. Along with stock market indices, Bitcoin has experienced a fall in the price. Therefore, the participants in the crypto community have been confused: there is no consensus. But there are very interesting points of view.
From March 12 to 13, 2020, Bitcoin experienced the most significant drop in price over the past five years, falling by more than 50%. The same week, the Dow Jones also demonstrated the worst results since the 1987 crash, losing 9.99%. But since then, bitcoin has separated from traditional markets - as long as they continue to fall, cryptocurrency is mainly traded in a sideways trend and gradually grows to pre-crisis levels.
Halving occurs approximately every four years. This is a fundamental part of bitcoin code. About every 10 minutes, one of the miners in the network solves a new task, receiving a predetermined number of new bitcoins for this. In the early years, the reward was 50 BTC. Halving is needed to prevent bitcoin inflation from mining new coins.
“Unlike most national currencies, bitcoin was originally developed with a fixed offer and a projected inflation schedule. There will be 21 million bitcoins in total. This predetermined number makes this cryptocurrency scarce, and it is this deficit, along with its usefulness, that significantly affects its market value, ”Blockchain.com representatives wrote on their blog ahead of the 2016 halving.
In 2012, the first halving took place, reducing the block reward to 25 BTC. Four years later, the reward for the coin fell again - already to 12.5 BTC, and in 2020 to 6.25 Bitcoin.
As for the ratio of the asset’s price change and a halving, there are different opinions, but most people agree that halving helps to increase the price of Bitcoin. That is exactly what happened in the past. But experts disagree on what to expect from the new 2020 halving.
The cryptanalyst PlanB has developed a pricing model that shows that each Bitcoin halving leads to a drop in the supply of bitcoin, which leads to an increase in its price.
Many members of the crypto community on Twitter share similar sentiments, arguing that the current price of bitcoin does not reflect the upcoming halving. Some cryptocurrency analysts believe markets will become bullish.
Danny Scott, CEO at CoinCorner, also talks about growth:
“Due to the third halving happening, there are some expectations of what might happen, as history tells us that the price of bitcoin, as a rule, will begin to rise significantly within 12 months after halving.” He added that he expects Bitcoin's price to rise to a record high of around $20000 this year.
As for miners, many, and many of them, are optimistic. As TerraCrypto’s founder Nikita Vassev commented, the industry is expecting a growth rate:
“Halving is an approaching intrigue that will soon unleash. We talked with various participants in the industry, we see who is getting ready for it, of course, halving and the Bitcoin exchange rate are very closely related. Now we see how the Bitcoin rate is increasing on its eve, and this is not by chance. Those who play in the long run have already bought new equipment and put it on their mining farms, since the payback of such machines will be faster. Others are waiting for a halving and will make investment decisions after that. But perhaps such a solution will pay off longer, as those who entered with new equipment before halving will beat off expenses faster than others with the current complexity. Our forecast: the rate will increase gradually to the level of $ 11000-13000.”
Emmanuel Goch, CEO of Skew crypto data analysis company, disagrees with this concept. He noted that Bitcoin options traders expect a downturn in the market after the next halving.
Philippe Salter, Head of Genesis Mining, said that halving is unlikely to lead to a bull market this time around:
“For example, many miner pools will become unprofitable after halving the reward, and they will need to cancel their electricity contracts and sell their mining equipment. This could lead to a bear market.”
Sharif Allayarov, Director of Matrixport Business and Sales Development, partially agrees with him:
“The previous halving of bitcoin rewards in 2012 from 50 to 25 and in 2016 from 25 to 12.5 bitcoins clearly showed that the growth of the bitcoin exchange rate after halving is just a matter of time. This is what you need to pay attention to when the growth rate occurs. All analysts, including our leader Mr. Wu Cihan, predict that there will be no sharp jump in the course immediately after halving. I join this opinion, and even think that after halving, a drop in the rate at about 7-10% is possible, and this will last for about 6-8 months. Before halving, we will observe a slight increase, as activity grows, some people, in the hope of earning money, will transfer crypto assets from the altcoin basket to the Bitcoin basket before halving, which will lead to growth. But there will be no sharp jumps after that, and the courses will return to their places.The hardest thing will be for miners. The halving will affect them most of all. All equipment of level S9 and below will be simply unprofitable. Today, earnings from 1 tera hash per day is about $0.11, and this gives $1.54 to one S9 miner’s earnings per day. And the costs associated with maintaining and paying the miner per day are equal to $1.51. This halving will reduce this twice, which will not give further opportunities for miners of this level to work. More powerful and new models of miners will earn, and when you turn off old miners, new models will earn more, as the complexity of the network decreases and earnings grow. You also need to consider that new models will be connected, so there will be rejuvenation and updating the network with new equipment. After all this hype around with the replacement of miners, perhaps we will see an increase in the rate in 2021 in the spring.”
Everyone remembers that Bitcoin has always historically grown after a halving. But this observation is based only on the results of two previous halvings. Given the current situation in the world as a whole and in the cryptocurrency market in particular, the consequences of this halving may be unexpected.
Utorg crypto exchange CEO Pavel Lerner believes that this time halving will not particularly affect the price of BTC:
“In my opinion, this time bitcoin halving will not have a strong impact on its price, as it was the last two times. Nevertheless, I still expect a slight increase in the price and its consolidation in the region of 9000. The main thing over time is to understand how this event affected the mining industry and the miners themselves, especially small ones. In general, the effect of halving will be both short-term and long-term.”
A more pessimistic opinion was expressed by the famous trader and CEO of Cryptorg.Exchange Andrei Podolyan:
“I believe that halving is already included in the price of Bitcoin. Now major players are trying to raise the price as high as possible, while there is hype, new money is coming in and the media is full of news about new records."
If we draw an analogy with the previous important events: the appearance of futures on BTC, Bakkt, etc., as well as recently held halvings in LTC, BCH, etc., you can see that all these events negatively affected the value of coins.
Sergey Lloyd from MSKminer believes that there will still be a fall in the rate, but only in the short term:
“The upcoming halving will halve the reward for the miners, and everyone wonders what prices we will come to. It seems to me that there will be several waves of high volatility of the rates - the temptation for large participants to earn on the expectations of traders is too great. But over time, in the period of 1-2 months there will be a gradual increase. We expect Bitcoin to fall to 12-15K by the autumn 2020, as the offer from the miners will decrease, the increase in complexity due to the shutdown of obsolete equipment will also slow down for some time, and there will probably even be a slight drop, up to 20-30%. Further growth will depend on the place in the new crisis economy for independent cryptocurrencies, if it is possible to expand the niche of payments, cross-border transfers, then, respectively, capitalization and rates will grow quite quickly.”
The most radical point of view was expressed by a well-known person in the crypto community:
“As long as centralized exchanges control the Bitcoin price, nothing will change. Because a lot of Bitcoins are just “drawn” on such exchanges.”
There are many opinions. Everyone is worth listening to. But you will have to make investment decisions yourself.
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