On Monday this week, the much-hyped price “halving” occurred on the Bitcoin blockchain - the 3rd such halving in its history. As halving takes place approximately every 4 years, and as Bitcoin was launched in 2009, there have been two previous halving events - one in November 2012, the other in July 2016.
Just before the halving, Bitcoin trading providers showed that the BTC/USD pair reached the $10,000 mark - gaining more than 45% since January, before heading back down to $8,106. Halving has always been a bullish event for Bitcoin - which is still up about 30% this year at the time of writing - but many investors are wondering what comes next for Bitcoin’s price.
What does halving mean?
As explained in this BBC article, Bitcoin is a cryptocurrency that relies on “miners” to secure the network by validating transactions and adding them to “blocks”, which are then added and attached to the blockchain. This process is called “mining” and the validation consensus used is called the proof-of-work (PoW).
With the PoW protocol, miners compete against each other to solve complex math puzzles to create “blocks”. In return for their work (mining requires powerful machines and electricity), miners receive newly created Bitcoin.
Before Monday’s halving, the reward was 12.5 BTC, but now miners will receive 6.25 new coins for the next 4 years. Implemented by its creator(s) at Bitcoin’s inception, halving events ensure that inflation is controlled.
Unlike fiat currencies such as the American Dollar (USD), the Pound (GBP), or the Euro (EUR), cryptocurrencies are decentralized. Therefore, their money supply is not regulated or influenced by any country, government, or central bank.
What comes next for the Bitcoin price?
While this halving might have turned into a ‘non-event’ for Bitcoin, as the event has been talked about for a while and was essentially already priced in by the market, it doesn’t mean that prices won’t keep rising like they did in the previous halving events.
The BTC/USD rallied and crossed $10,000 last week for the first time since February ahead of the halving, but it wasn’t able to stay above this important level, falling just when the halving happened, making many investors wonder if prices will keep rising.
It must be said that this halving is taking place under certain circumstances with the Coronavirus epidemic, which has strongly impacted traditional markets and caused heavy losses for investors.
Consequently, these investors had to find liquidity by selling whatever they could - including Bitcoin. That is why Bitcoin’s price experienced a sharp decline - like many financial traditional assets mid-March - with the BTC/USD falling to $3,900. Since then, Bitcoin recovered strongly, trading around $8,900 at the time of writing.
What's next for Bitcoin?
For some experts, prices could go back to the $10,000 level and beyond, as the overall BTC offer has been reduced, while the demand should remain the same - which should, therefore, support its price.
For others, the demand for Bitcoin could even rise, which would increase the price.
More people see cryptocurrencies as an alternative way to protect themselves from the impact of extraordinary monetary stimulus packages on their purchasing power. Moreover, some analysts also expect the increased interest from institutional investors to boost Bitcoin’s demand.
The Bitcoin price V-shape recovery to the psychological $10,000 level is quite bullish for many crypto-traders, who now expect the Bitcoin to reach the strong resistance zone of $14,000- $15,000 in the next quarter. They believe that the rally is just beginning, as many positive factors and fundamentals will support the uptrend in the upcoming weeks and months. What is your scenario?
Todd Wilber is a consumer goods entrepreneur with lots of hands-on experience in business start-ups, customer service, marketing and CyberSecurity. As a freelancer, I worked for Hackernoon.com, Homebusinessmag.com,Valuewalk.com, and Entrepreneur.com He is equally an experienced writer and public speaker. You can find him on Linkedin.