How Bullish is the Bitcoin Halvening?

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The halvening is just a month a change away, and everyone’s getting excited. In the past, we’ve seen significant price increases and a new wave of businesses ushered in by the coming of the reward halving. What will the 2020 halving bring?

Silk Road Founder Weighs In

For the uninitiated, what will happen is simple enough: the amount of new Bitcoin created every ten minutes will decrease by half. This means that Bitcoin miners will be working the same for half the pay, and should translate to an increase in the price of BTC.

I’ve written before that it’s not set in stone whether or not Bitcoin will jump in price as a result of the block reward changing. The truth is that it remains to be seen. Ross Ulbricht has weighed in on the matter from prison. He writes, in part:

Those halvings occurred during a truly spectacular bull market in which bitcoins rose in value 75% of the time (see here). With those odds, it is more likely than not that both halvings would occur during an uptrend just by chance. In other words, we can’t say that the stock-to-flow hypothesis was validated, so we can’t use it to predict what will happen this next time around. However, that does not mean the value won’t rise, or that it will fall. It just means that if it does, it probably is not due to the halvings.

There is a lingering possibility that the halvening will be nothing more than a technical affair, fully divorced from the market. Miners will react by taking what they can get at market, and things will progress as such.

It’s just as likely that the price of Bitcoin will jump as a result of the decrease in supply. This is what the Silk Road founder is trying to say: things can go either way, and you can blame the halvening either way.

Ulbricht concludes his article by saying that both bears and bulls can use the upcoming change in supply for BTC to justify their positions.

Miners To Take Biggest Hit

But what about the miners? How will they survive in a world that doesn’t necessarily respond by doubling the price of BTC right away? That much is unlikely, but stranger things have happened. After all, Bitcoin has seen $12,000 before.

Miners seem destined to take a hit regardless of what they do in this scenario. For those that sell their coin immediately, which is most, it means a loss in revenue up to 50%, if not worse. With the market having tanked recently, purportedly due to coronavirus, miners are already under a great deal of stress where profit is concerned. The difficulty level, an indication of how many miners are on the network, has simultaneously been rising. This means that miners are working harder, for less reward, in a market that’s shown it’s not unwilling to go lower.

So it goes, sometimes for some.

What about the rest of the market though? The hodlers and the traders?

Like as not, they’ll be fine, specifically those that hold. For while it may be unreasonable to expect a sort of geometric line of growth in price versus supply, some increase is definitely to be expected. Therefore a simple investment is to buy now and hold until then. But Ulbricht fully addresses this strategy: it may be too late, as everyone knows about the halving. There’s nothing privileged about that strategy.

Whatever happens, Bitcoin is likely to be better off as it moves forward, even as less new BTC enters the atmosphere every block.