Bitcoin Halving - bitcoin halving price prediction

Bitcoin halving

What Is a Bitcoin Halving?

Bitcoin's most recent halving occurred on May 11, 2020. To explain what a Bitcoin Halving is we must first explain a bit about how the Bitcoin network operates.

Bitcoin and its blockchain are basically a collection of computers, or nodes, around the world that all have Bitcoin's code downloaded on them. Each of these computers has all of Bitcoin's blockchain stored on them. 

This means that each computer has the entire history of Bitcoin transactions, which ensures that no one can cheat the system as every computer would deny the transaction. In this way, Bitcoin is entirely transparent and no one can make a transaction without everyone seeing it happen. Even those who do not participate in the network as a node or miner can view these transactions taking place live by looking at block explorers.

More computers, or nodes, added to the blockchain increase its stability and security. There are currently over 10,000 nodes estimated to be running Bitcoin's code.1

While anyone can participate in Bitcoin's network as a node, as long as they have enough storage to download the entire blockchain and its history of transactions, not all of them are miners.


Bitcoin Mining

Bitcoin mining is the process where people use their computers to participate in Bitcoin's blockchain network as a transaction processor. Bitcoin uses a system called Proof of Work. This means that miners must prove they have put forth effort in processing transactions to be rewarded. This effort includes the time and energy it takes to run the computer hardware and solve complex equations.

bitcoin halving countdown

Faster computers with certain types of hardware yield larger rewards and some companies have designed computer chips specifically built for mining. These computers are tasked with processing Bitcoin transactions and they are rewarded for doing so.

The term mining is not used in a literal sense but used as a reference to the way precious metals are gathered. Bitcoin miners solve mathematical problems and confirm the legitimacy of a transaction. They then add these transactions to a block and create chains of these blocks of transactions, forming the blockchain. When a block is filled up with transactions, the miners that processed and confirmed the transactions within the block are rewarded with Bitcoin.

Transactions of greater monetary value require more confirmation to ensure security. This process is called mining because the work done to get new Bitcoin out of the code is the digital equivalent to the physical work done to pull gold out of the earth. More information on the technical inner workings of Bitcoin mining can be found in our Bitcoin mining article.

Halving


Every 210,000 blocks mined, or about every four years, the reward given to Bitcoin miners for processing transactions is cut in half. This cuts in half the rate at which new Bitcoin is released into circulation. This is Bitcoin's way of using a synthetic form of inflation that halves every four years until all Bitcoin is released and is In circulation.

bitcoin halving dates

This system will continue until the year 2140. At that point, miners will be rewarded with fees for processing transactions that network users will pay. These fees ensure that miners still have the incentive to mine and keep the network going. The idea is that competition for these fees will cause them to remain low after halvings are finished.

when is bitcoin halving

The halving is significant because it marks another drop in Bitcoin's dwindling finite supply. The total maximum supply of Bitcoin is 21 million. At the time of writing, there are 18,361,438 Bitcoins already in circulation, leaving just 2,638,562 left to be released via mining rewards.

In 2009, the reward for each block in the chain mined was 50 Bitcoins. After the first halving it was 25, then 12.5, and on May 11th, 2020 it became 6.25 Bitcoins per block.3 To put this in another context, imagine if the amount of gold mined out of the earth was cut In half every four years. If gold's value is based on its scarcity, then a "halving" of gold output every four years would theoretically drive its price higher.

Coinmetrics Bitcoin Halving

Coinmetrics logarithmic chart of Bitcoin price action following halvings.
These halvings reduce the rate at which new coins are created and thus lower the available supply. This can cause some implications for investors as other assets with low supply, like gold, can have high demand and push prices higher.

In the past, these Bitcoin halvings have correlated with massive surges in Bitcoin's price. The first halving, which occurred in November of 2012, saw an increase from about $12 to nearly $1,150 within a year. The second Bitcoin halving occurred in July of 2016. The price at that halving was about $650 and by December 17th, 2017, Bitcoin's price had soared to nearly $20,000. The price then fell over the course of a year from this peak down to around $3,200, a price nearly 400% higher than Its pre-halving price.4

The theory of the halving and the chain reaction that it sets off works something like this:

The reward is halved → half the inflation → lower available supply → higher demand → higher price → miners incentive still remains, regardless of smaller rewards, as the value of Bitcoin is increased In the process.


In the event that a halving does not increase demand and price, then miners would have no incentive as the reward for completing transactions would be smaller and the value of Bitcoin would not be high enough. To prevent this, Bitcoin has a process to change the difficulty it takes to get mining rewards, or, in other words, the difficulty of mining a transaction. In the event that the reward has been halved and the value of Bitcoin has not increased, the difficulty of mining would be reduced to keep miners incentivized. This means that the quantity of Bitcoin released as a reward is still smaller but the difficulty of processing a transaction is reduced.

This process has proven successful twice. So far, the result of these halvings has been a ballooning in price followed by a large drop. The crashes that have followed these gains, however, have still maintained prices higher than before these halving events. 

For example, as mentioned above, the 2017–2018 bubble saw Bitcoin rise to around $20,000, only to fall to around $3,200.4 This is a massive drop but Bitcoin's price before the halving was around $650. While this system has worked so far, the halving is typically surrounded by immense speculation, hype, and volatility, and it is unpredictable as to how the market will react to these events in the future.

Bitcoin halving history

bitcoin halving history

The first Bitcoin halving occurred in November 2012, when the network reached 210,000 blocks.

The event was preceded by enthusiastic trading and traders around the world hosting halving parties, with prices rallying from under $4 at the start of 2012 to reach $13 by year-end.

The second halving was in July 2016, but anticipation peaked a month before the event, resulting in a sell-off by some investors before the event, and market watchers were more practical in general this time around.

But by early 2017, prices had reached $1,000 then rocketed close to $20,000 by the end of the year.

After sliding back to the mid-$3,000s at the start of 2019, prices have been rallying again in anticipation of the third halving.

The price is currently up more than 30% this month at US$8,865 with market watchers expecting the next halving to add significant value to Bitcoin, in line with the previous events.
  • 1st halving - 28 Nov.20212
  • 2nd halving - 9 Jul 2016
  • 3rd halving - 11 May 2020
  • 4th halving - Expected 2024
  • 5th halving - Expected 2028
  • Maximum supply reached Expected 2140
bitcoin halving history

Pricing outlook

According to Mr. Travers, the Bitcoin halving is anticipated to have a positive effect on Bitcoin prices over time, as has been the case historically.

Bitcoin halving price chart



He said instead of a once-off spike in the price of Bitcoin at the time of the halving, the year after the previous two halvings were “the best two years in Bitcoin’s history”.

“In 2013, the price went from $10 to $1,000 and in 2017, the price went from $1,000 to $20,000; history suggests a price increase post this halving,” he said.

According to Mr. Travers, the price history showed investors “you don’t need to pick the price bottom to achieve significant returns from Bitcoin”.

He also noted DigitalX’s long-term buy and hold strategy for Bitcoin means investors don’t miss out on the best trading days of the year.

“Predicting short-term movements in any asset class with high probability is difficult. If you missed the best 10 trading days each year in Bitcoin over the last six years, you would be down around 25% annually,” he said.

Although DigitalX has not released any price forecasts, stock-to-flow crypto analyst Plan B recently predicted the price of Bitcoin could reach US$288,000 by 2024.

Mr. Travers said while Bitcoin is currently outperforming all major asset classes for 2020, it is still a minnow in terms of a global store of value, comparing its $160 billion value to the $90 trillion central bank money market or physical gold’s $10 trillion asset size.

“It is still very early and there is a lot of room for upside,” he said.

“It’s certainly not there yet but what we are seeing, particularly among younger investors, is there is a greater affinity for Bitcoin than there is for gold,” Mr. Travers added.

Next bitcoin halving date

next bitcoin halving date

  • 1st halving - 28 Nov.20212
  • 2nd halving - 9 Jul 2016
  • 3rd halving - 11 May 2020
  • 4th halving - Expected 2024
  • 5th halving - Expected 2028
  • Maximum supply reached Expected 2140

Bitcoin halving price prediction

Bitcoin Halving 2020 - What is this?

Once the 2020 Bitcoin halving happens, as mentioned, the Bitcoin mining rewards will be reduced to 6.25 BTC per block.

Bitcoin halving price prediction

The approximate date that we have provided is a result of the following a simple equation and is nothing more than approximation:

  • 1 BTC block is mined every 10 minutes
  • 144 blocks are mined every 24 hours (6 x 24 = 144)
  • the current block is 590,675 (August 18th, 2019)
  • 39,325 blocks left until halving (630,000 – 590,675 = 39,325)
  • 39,325 blocks / 144 blocks in a day = 273 days
  • August 18th, 2019 + 273 days = May 17th, 2020
So, what to expect after the date?

For miners, obviously, the block reward is going to be smaller, but for the rest of us, the future is uncertain despite the historical facts. If the interest in Bitcoin stays the same, and the scarcity greater, the natural thing would be for the price of the asset to increase. However, and as you will see in the predictions section, it is difficult to give an exact number.

However, it is also being said that around 30% of all the existing Bitcoin is unreachable by the owners due to negligence, deaths, hardware malfunctions without backed private keys, etc, further enhancing the level of scarcity. For your information, with the next halving, the inflation rate of Bitcoin will be set at 1.80% per annum.


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