Bitcoin’s third halving in May of 2020 has been a hot topic over the last few months. It seems like everyone has something to say about it and experts have differing opinions on the medium-term and long-term impact.
Most are pointing to historical data related to the BTC performance after previous halvings. That said, when you look at it from the perspective of wagering your money against the market, you must realize that past performance does not mean there is a guarantee of a similar outcome in the future.
This is why some pundits have high hopes for bitcoin’s future, and others believe we could see price and overall value decrease substantially.
BTC Current Price
As of Thursday, May 14th, bitcoin has climbed back up to 9,695.00 US dollars. This is almost a full recovery since the March 12th global equities crash.
One important distinction with BTC’s recent volatility is its clear U-shape. Over the last five days. The king of all cryptos had recovered and reached $10,000 again on May 7th. But just before the halving was to occur, it steadily started sliding down again, reaching $8,600.00 just hours before the latest halving was scheduled. However, almost immediately, it began a stable upward trend again and is on its way back to that key 10K mark.
The Halving Effect
After the previous two halvings, BTC saw a significant increase over the course of the following year and then stabilized at new price highs that have never been seen before. Essentially, they became the new market baseline with daily/monthly volatility spiking above or plunging below the new ‘average’.
The first bitcoin block was created back in 2009. This was back when the coin was worth a fraction of a cent. Blocks are just digital ledgers that once created exist on millions of servers all over the world that are constantly reconciled. Each block is limited to 1MB and can house roughly 3,500 transaction records. Each time a new block is created, a reward is offered in the form of BTC units. Back then the reward was 50 units per block.
Some people mistakenly think that BTC halving is similar to stocks splitting. This is not the case. The value of BTC is not halved, rather the rewards are halved. Every 210,000 blocks created, BTC rewards are halved. When the first halving occurred in 2012, the rewards we cut to 25 BTC per block. Then, in 2016, it went down to 12.5 per block. Now, in 2020 miners only receive 6.5 bitcoins per block as a reward. So, now minors only receive 6.5 coins per block to cover their operating costs.
We will see many of the smaller operations fall of the map and even some of the larger operations that have high operating costs for one reason or another. This could lead to significantly reduced hashing power. Meaning, without all of those extra servers solving hashing algorithms to verify transactions. That said, as BTC price increases, we’ll see smaller operations hop back in the game.
Market Predictions
Most people can agree that they think BTC will surge past the 20K mark by 2021. But some leading analysts believe that the coin next bull-run will take it past $250K by 2024. OK. On the flip side, Lee recently predicted that BTC would settle at a new low for quite some time. He predicted that the crypto would plunge below $3600 again and stabilize for a while.
These two predictions form trusted sources couldn’t be further apart. I mean, talk about a wide gap in thought. So, what are we to do?
The answer is easy: watch and wait. If you can’t afford to dump thousands of dollars of cash into a volatile market right now, don’t. Play it conservatively. Yes, historically the coin has always gone on a bull-run after halving, but those were different times. People could buy dozens, hundreds, even thousands of coins back then. Now, regular Joes can only grab fractions of a coin. So, regardless of what anyone says, we really don’t know what will happen this time around.
