Bitcoin Halving 2020: 4C’s final touch

As of late, the hottest topic in crypto has been the May 2020 Bitcoin Halving. Here and there, you can see everyone speculating about the price of Bitcoin and how high it could soar in the coming months and years. Let’s summarize what we know so far.

Bitcoin 2020 Halving – previous extensive research on our blog

What is that halving everyone is talking about?

Block halving is an occasion that happens once generally at regular intervals (approx. every four years) wherein the block reward for miners gets diminished significantly (by half). Subsequently, the rate at which new bitcoins are mined slows down. The dividing occasion is periodical and is implemented into Bitcoin’s code. As indicated by the Bitcoin code once every time 210,000 Bitcoins enter the course, a halving happens.

Which halving is this?

Historically, there have already been 2 halvings: the first in 2012 and the second in 2016 where the mining rewards decreased from 50 to 25 and 12.5 respectively. Now, from May 2020, the block rewards will become only 6.25. Since there is a set number of bitcoins (the supply is capped at 21 million), there will only ever be 64 halvings in history.

When will it happen?

It depends on when block #630,000 (3×210,000) will be mined. Averagely, one block is mined every 10 minutes, and 144 blocks are mined every day and as a result, 1,800 bitcoins are mined approximately every day. At this rate, there is an average of four years between halvings with the next one due in mid-2020. Nonetheless, since the rate of bitcoin mining goes up and down, the exact date the halving event will occur is still unknown. However, it should happen before the 20th of May.

Will Bitcoin’s price go up?

It has been known and historically accurate that the value of Bitcoin becomes notoriously volatile around and after a block halving, meaning its prices can change rapidly during this period. Because of that, it is impossible to predict the future of Bitcoin prices after the halving with complete certainty.

However, both in 2012 and 2016, the price of Bitcoin rose to mentionable highs around a year after each previous halving event in addition to its overall growth over the years. There are a few explanations for this effect. First, by reducing the rate at which new Bitcoins enter the market, scarcity is created and the Stock-to-Flow ratio is disturbed, thus driving prices up.

Here is our previous article that also sheds some light on the value of Bitcoin – Stock to Flow Model.

Additionally, people’s experience with the previous halvings has resulted in crypto enthusiasts proactively betting on the price-growth for 2020 which acts as yet another catalyst for growing prices.
With the likelihood of Bitcoin’s value increasing with each halving event, holding onto your crypto has become exponentially more profitable.

However, this halving may be different. We are in a very different time than we were a few years ago: the recent outburst of COVID-19 has questioned and shattered many assets including Bitcoin (it lost almost 60% of the value on March 12th), casting doubts to Bitcoin’s alleged store of value as the “digital gold”. Many investors are still holding to what they have most precious, awaiting the markets and economies to move. We also have futures trading in crypto now, something that had a massive effect on the 2018 crash. Therefore, we think that the impact on the market of this halving is overestimated and many investors and crypto enthusiasts may end up disappointed in the coming months.

Fun Fact: Bitcoin has historically bottomed 459 days prior to the halving, climbed leading into it, and then exploded to the upside afterward. The post-halving rallies have averaged 446 days – from the halving to the peak of that bull cycle.

In this cycle, the market had been bearish in fact for 514 days before the halving. If history were to repeat itself, Bitcoin would peak in August 2021.

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