Four Months Out: What Do Analysts Think of the Bitcoin Halving Effect on Price?
With it now being January 2020 — happy new year, Blockonomi readers — Bitcoin’s “halving” or “halvening” is now four months out.
For those that missed the memo, this cyclical event that takes place every four years is when the number of coins issued per block gets cut in half, equating to a 50% decrease in inflation for the leading cryptocurrency. For the upcoming event, the 12.5 coins released per block will get cut in half to 6.25.
This means that Bitcoin’s inflation rate will fall to 1.8%, lower than of the Federal Reserve’s target 2% and purportedly around that of gold.
As always, analysts are currently divided on what this event will mean for Bitcoin. Some say it’s bullish, others say it may be negligible, or even bearish should certain events take place.
The Bull Argument
Alistair Milne of Altana Digital Currency Fund recently noted that after the halving comes into effect in 2020, 50% of all newly mined Bitcoin will be absorbed by the purchases of clients of two companies: Grayscale through its Bitcoin Trust and Square through its BTC buying service.
This ignores the inflows from Coinbase customers, people buying cryptocurrency through RobinHood and eToro, and so on and so forth.
After halving, ~50% of all newly mined Bitcoin will be absorbed by just two companies: GBTC and Square
This ignores the 30million Coinbase customers, people investing via RobinHood, eToro, etc. etc
… but tell me again how halving is priced in.
— Alistair Milne (@alistairmilne) December 21, 2019
In other words, should demand persist or grow, the halving will act as a negative shock to the supply-demand economics model for BTC, pushing prices higher with ample time.
That’s not to mention that PlanB’s stock-to-flow model (accurate to a 95% R squared, meaning highly accurate statistically speaking), which relates BTC’s market capitalization to the scarcity of the asset, found that the leading cryptocurrency will have a fair market capitalization of $1 trillion following the 2020 halving. This correlates with a $50,000 price per each coin.
#Bitcoin halving .. 4 months to go
IMO halving is priced in correctly and markets are efficient, in the sense that few people (10%) know, understand and believe S2F model, and most people (90%) don't know S2F, don't understand stats&math behind it, think demand is missing etc pic.twitter.com/Z9nBPmRBvK
— PlanB [Jan/3➞
] (@100trillionUSD) January 1, 2020
The Bear Argument
On the neutral-to-bearish side, Jason Williams, co-founder at digital asset fund Morgan Creek Digital, said at the turn of the previous month that one of his unpopular opinions is that “Bitcoin halving in May 2020 won’t do anything to the price. It will be a non-event.”
This has been echoed by Bitmain chief executive Jihan Wu, who, as reported by Blockonomi on an earlier date, said at an industry event that there is no guarantee that a Bitcoin bull run will follow the halving this year.
Interestingly, this has been corroborated by data, with an analysis of data on 32 halvings across 24 crypto assets by Strix Levithan finding that there is no clear evidence that crypto assets that see their emission halve “outperform the broader market in the months leading up to and following a reduction in miner rewards.”
Does It Even Matter For Bitcoin?
While some analysts are putting a lot of faith in the halving and its potential ability to change Bitcoin’s price trajectory for the better, some commentators say that it doesn’t matter. More specifically, a common sentiment that is reverberating throughout the industry is that the path of the technology is positive, with or without Bitcoin’s halving.
Asia’s Global Coin Research released ts “Community Predictions for 2020” report, in which it cited countless industry executives.Changpeng “CZ” Zhao, the prominent chief executive behind crypto’s top firm, Binance, was quoted as saying that he thinks that the long-term trajectory for the Bitcoin and crypto market remains decidedly positive. He elucidated:
“Bitcoin is still a small market cap instrument so there will be high volatility in the short term. However, if you look at the fundamental technology, the longer-term view, about a 5-year or 10-year horizon, we’re very confident that bitcoin and cryptocurrencies are here to stay.”
Andy Bromberg, co-founder of CoinList, echoed this assertion in an interview with Bloomberg, remarking that from his perspective, there hasn’t been this much “building” in the crypto market since 2017.
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OhNoCryptocurrency via https://www.ohnocrypto.com/ @Nick Chong, @Khareem Sudlow
