The halving of the bitcoin is just around the corner, investors are already preparing for the shortage of the cryptocurrency. However, the forecasts regarding the future course of the price differ widely, while some expect substantial price increases in the coming year, others argue that the halving has already been priced in.
• Halving reduces the prospect’s reward to 6.25 Bitcoin
• Does Bitcoin follow a historical pattern?
• Expert opinions differ widely
The third halving is on the way
The third bitcoin halving is expected for May 9, 2020. As soon as the 630-thousandth block was mined, the cryptocurrency mining reward halved from 12.5 bitcoin per block to 6.25 bitcoin. This is a coded and unchangeable process that takes place approximately every four years since the Bitcoin was created. The halving serves to artificially create scarcity and to keep the price inflation of the bitcoin low.
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It is one of the most anticipated events of the year in the crypto scene, with which significant price movements have been associated in the past. This year, however, experts disagree in which direction, if any, Bitcoin will move in the course of the halving.
The number of analysts who see the halving already priced in is increasing.
Crypto experts disagree
Historically, two halvings have taken place so far, the first halving of the Bitcoin rate was on November 28, 2012 and the second was on July 9, 2016.
Similar behavior patterns can be seen in both cases. A year before the first halving, bitcoin saw a 342 percent increase, while it shot up 7,976 percent a year after the trial. The cryptocurrency behaved similarly in 2016, a year before halving, the price of bitcoin rose 112 percent, while it rose 2,867 percent the year after the halving.
As a result, comparable behavior could be assumed for halving this year. But against this theory speaks the law of chance, which any financial markets impressed. In addition, the analyzed period is too long to hold the halving responsible for the price movements.
Therefore, analysts are discussing to what extent the upcoming halving will shape the future course of bitcoin. Some experts see the halving already priced in, others predict a further price increase.
Has the halving already been priced in, or is there a price increase for Bitcoin?
In theory, halving will lower supply when demand is the same or increasing, which would cause prices to rise according to the supply-and-demand principle. But other voices argue that the halving has already been priced in.
Bitcoin analyst PlanB comments on Twitter that there is no demand for Bitcoin, and 90 percent of people do not understand the model, the statistical and mathematical principles are not understood.
Meltem Demirors, an analyst at CoinShares, also believes an upcoming bull market in Bitcoin is unlikely. Demirors comments on Twitter that the crypto market is driven by derivatives trading and not by bitcoin itself. Therefore the law of supply and demand does not apply.
Since the halving has been expected by investors for some time and the majority of traders calculate the associated price change, the traders are already acting accordingly. Therefore, critical voices also argue that Bitcoin has already reached its final level.
Nevertheless, it should not be disregarded that the halving will nevertheless reduce bitcoin supplies. In addition, the current demand is still very high. Thus, the majority of experts disagree that the halving has already been priced in. Ergo they forecast rising prices over the next 15 months.
Only the future will determine which side of the coin will come true. Therefore, when it comes to the future of Bitcoin, it means waiting first.
Henry Ely / editorship finanzen.ch
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