Previous bitcoin halvings in 2012 and 2016 led to an increase in the cryptocurrency rate. The next decrease in the reward for the mined block will take place in May 2020, and many expect another pump from it. However, there are significant arguments to counter this opinion.
The opinion of Russian experts
BitCluster Industrial Mining Operator Development Director Dmitry Shuvaev notes that miners may suffer the most from halving:
“It is important to understand that halving bitcoin will primarily affect the income of miners. If the price of the currency remains unchanged, then profitability will fall by half. It is necessary to take into account the complexity of the network, which has increased by 58% since June 2019. By May 2020, we expect from + 60% to + 120% to the complexity of the current level (depending on the dynamics of the course during this period). ”
Currently, with a BTC rate of $ 8700, the cost of extracting one bitcoin with the Innosilicon T3 – 50Th / s device is $ 5500. The estimated production cost of 1 BTC with Innosilicon T3 – 50Th / s devices in May 2020 will be $ 10,000-11,000. In order for the mining rate of return to remain at the current level, after halving, the cost of BTC should be at least $ 18,000.
Smart Block Laboratory PR Director Timofei Fortunatov prefers not to rush to unfounded forecasts:
“The cryptocurrency market is still too young. At the moment, not enough historical market events have been accumulated to build accurate correlations and make accurate forecasts. Yes, a reduction in rewarding miners can lead to a reduction in the volume sold by miners, which in turn will create an imbalance in supply and demand. This can really contribute to a sharp increase in price, but, as we see in the example of lightcoin, the surges are temporary, and they can be caused by completely different events.
In his opinion, a lot of factors influence the cryptocurrency rate – from the launch of futures to the statements of the authorities. That is why one cannot expect that another rally will follow the new halving. As practice shows, the cryptocurrency market most often reacts the opposite to expected events.
It’s enough to recall the hype around the launch of the platform for institutional investors Bakkt – remembering the rapid growth of the exchange rate in December 2017 after the launch of bitcoin futures, the main cryptocurrency was prophesied by a new “native”. However, in reality, everything turned out differently – after the opening of the first fully regulated platform for trading bitcoin futures, the MTC lost almost $ 1,000 in price.
Statistics of past halvings
The graph shows that before each halving, the growth of the bitcoin exchange rate (light blue line) began, which lasted for some time. However, the selection of data for detailed analysis is extremely small – the market survived only two of these events. To make forecasts, it is necessary to operate with other data. For example, fundamental analysis of supply and demand for bitcoin.
Supply or demand
Well-known cryptocurrency trader Tour Demeister notes that bitcoin can hold above $ 8,000 until the next division with an investment inflow of $ 2.9 billion. This compensates for the deflationary effect of new coins entering the network. Assuming that investment growth remains constant with fewer new coins on the market, the exchange rate is bound to rise.
A trader under the nickname PlanB published a post in 2018 in which he described in detail the behavior of the BTC course after a halving. According to his research, growth should be expected immediately after May 2020.
There is a statistical relationship between stocks and market value. Based on this relationship, the S2F model is constructed, which considers the ratio of inventories (turnover units) to their flows (production per year). This model was actively used to predict the prices of gold and silver, but it is also suitable for bitcoin. Overlapping BTC indicators on the S2F model gives the expected bitcoin exchange rate of $ 60,000 for the next halving. Demand in this method is not taken into account.
Smart investors are aware of all the factors that should affect the Bitcoin exchange rate, so they should have already made an adjustment to the offer in their models and taken a waiting position. That is why there is an opinion that growth from $ 3,000 to $ 12,000 this year is already part of the preparations for the upcoming May event.
However, analyst and TV presenter Alex Kruger does not think so. He argues that the rate of bitcoin is more influenced by demand than supply. Krueger is confident that the offer is completely deterministic and does not have any effect on the price, so the effect of halving on the cryptocurrency rate does not have a direct relationship.
Whether to buy BTC before halving
Relying on historical correlation and increasing news background, investors will buy bitcoin in 2020. Only this fact will make cryptocurrency rise in price. The likelihood that the S2F model is erroneous and will lead to a loss of money is less than the likelihood that the model is correct and will bring an income of 500%. If a price rally begins by May, the offer-based models will be correct. In this case, they will already become a regularity.
The noise around the halving of the award cannot be avoided and this fact will attract even more investor interest. In any case, the emergence of forecasting models can only be attributed to positive factors in the development of cryptocurrencies.