Less than 4 months are left before the bitcoin halving, when the block reward will be reduced to 6.25 BTC. Historically, this event is associated with an increase in the price of the first cryptocurrency and is considered the first step to the next native. And what will this halving be like?
In this article, we will analyze the history and determine the dependencies of the bitcoin price before and after halving the reward in order to understand what to expect from the market. Let's evaluate the miners, due to which they can earn after halving. And also we will analyze the worst option that few people expect.
A bit of history
Bitcoin has already successfully survived two halving when the block reward was first reduced to 25 BTC, and then to 12.5 BTC. Both times after that, we observed a price increase and after it a hashrate grew, because more and more miners came. But not everything is as simple as it seems at first glance.
The first halving occurred in November 2012:
And after it, the price flew straight up until it set a historic high at $ 270, then there was a pullback of 80%, and then up again.
Bitcoin survived the second halving in July 2016, and a year and a half later we got the current maximum price of $ 20,000:
So in the first case, immediately after the completion of the bear market, the price tried to spin a new parabola, then there was a correction, after its completion a smooth increase, a sharp drop in the language of traders shaking it out with the same fast recovery. And further growth to a new high of prices with subsequent return to the bear market.
The second halving showed a slightly different picture. After the completion of the bear market, bitcoin from the third attempt moved to growth. There was a rapid rally in front of the halving itself, then an unexpected shaking, a slight decrease in prices after the halving itself and only further up and only forward to the current value record.
As you can see, before and after halving, the price behaves differently and now it’s quite difficult to say whether we will repeat one of the former paintings or draw a completely new one. But there are a number of common signs that should be highlighted and taken into account:
- The first is explosive growth, even parabolic growth, after the completion of the bear market with subsequent strong correction.
- The second sign is that Bitcoin can give hope for a new native, but in practice, the price never sets a new maximum before halving.
- And the third point is the mandatory shaking before halving.
Looking at the price chart for the current market cycle, we can assume that an increase to $ 14,000 and a correction after it with a sharp drop from $ 9,500 to $ 8,000 at the end of September were the very signs of an imminent halving. After all, we had a parabolic growth, we did not set a new maximum price and then fell very much down from a level that seemed strong enough.
The market may well show both growth and decline, and do not forget about the probability of unexpected shaking, because there may well be more than one.
Miners are most interested in halving, and it is not surprising that the hashrate began to grow again, because they try to earn as much as possible until the block reward is halved:
Immediately after the launch of the first cryptocurrency network, 50 BTC was supposed for each block, and today it is only 12.5 BTC, and soon this reward will be divided into two. But in the entire history of Bitcoin, its price grew faster than the power of miners, and they still remained in a decent plus.
This was until 2017, when large players began to enter the market and, as a result, the hashrate began to overtake the price. Therefore, during the 2018 bear market, for the first time, we saw how miners massively disconnect equipment, because it is simply unprofitable for them to work:
In theory, after halving, the market will receive half the number of bitcoins, and the deficit should provoke a price increase, which will allow miners to stay in business. But in practice this only sounds logical, because the fact that the product has become scarce does not mean that they will buy it.
The Bitcoin exchange rate is already quite high so that many new people dare to buy it. And if you look, for example, at requests from Google, then from mid-December 2019, the popularity of the request “bitcoin halving” is gradually growing, but “buy bitcoin” added slightly, and most likely is explained not by the proximity of the halving, but simply by restoring the rate:
We specifically look at Google Trends, because it is the newcomers who will seek information in this way, and experienced traders and investors have long had their favorite way to buy or sell bitcoins.
We may be objected that there is a Stock to flow model that shows the rise in the price of bitcoin as its inflation decreases:
But this graph shows a story that already existed and it cannot guarantee that it will happen again. I would like it to work further, but in fact halving itself does not push the price up in any way, only buyers do it and if they do not come after halving the block reward, then we will very soon become witnesses to the hash halving.
At the same time, even half of the current network capacity is enough for bitcoin to remain the most protected blockchain.
The worst version of halving
On August 5, “digital silver”, also known as Litecoin, which is sometimes called one of the indicators of the price of bitcoin, survived its halving. After it, the price not only did not double, but fell by 40% - and this we took into account the current price increase, and so investors received as much as -60%. We can say that Litecoin is not bitcoin and the deficit rule does not work for it, and its price is highly dependent on the rate of the first cryptocurrency.
This is a fair observation, but thanks to Litecoin, we have a clear example of how miners will behave when their costs are not offset by an increase in the exchange rate. Indeed, after halving, the Litecoin network capacity decreased by 70%, and there are no signs of recovery yet.
Мы предпочитаем говорить правду, даже если лично нам она не нравится. Поэтому эта статья вышла задолго до халвинга, и тут не было предсказаний в стиле: цена вырастет, потому что так было всегда и будет снова, только посмотрите на этот график.
Лично мы двумя руками за туземун и победу биткоина. Поэтому очень рады тому, что рынок показывает признаки возвращения к восходящему тренду. Но дело в том, что последние четыре года рынок криптовалют меняется крайне стремительно, и поэтому мы не исключаем, что старые модели цены начнут давать сбои, а мы будем видеть все больше заголовков, что никогда такого не было.
Надеемся, все поняли, чем именно мы хотели поделиться в этой статье, и что наш скептицизм насчет халвинга не отменяет туземун.