The third halving of bitcoin is the most anticipated event among crypto market players who are following the situation with great inte...
The third halving of bitcoin is the most anticipated event among crypto market players who are following the situation with great interest. Approximately on May 12, at 5:00 am Moscow time, the reward for each new block mined in the Bitcoin blockchain will be reduced from 12.5 BTC to 6.25 BTC, and miners will be able to mine 900 bitcoins per day instead of 1800. How is the current halving different from the previous two - we understand in the material.
Common in halvings
When they talk about Bitcoin halving, they usually pay attention to the change in the price of the first cryptocurrency before, during and after this event. Over the past year, out of the top 10 coins by capitalization, halvings have occurred in networks of such coins as:
- Litecoin - On August 5, 2019, a halving took place in the Litecoin network, as a result of which LTC rose in price by 12.4% per day - to $ 104. However, the peak of the altcoin price was recorded on June 22 at $ 143.7. And the reason was not the upcoming halving, but the growth of bitcoin quotes, which by the end of June rose to their year highs of $ 13,825. Today, LTC is traded around $ 46 per coin.
- Bitcoin Cash - On April 8, 2020, halving took place on the Bitcoin Cash network. On this day, the value of the altcoin rose by 11% - to $ 274.3, but then went down, eventually going into a downtrend. Now the BCH price is at $ 245. Compared to the year high of $ 491.2 (Feb 14), this is a strong fall.
- Bitcoin SV - On April 10, the Bitcoin Cash fork also saw a halving. On this day, BSV showed unstable dynamics, losing 6% and dropping to $ 184. However, BSV is the only altcoin that has risen in value and is currently trading at around $ 204.5. But this is noticeably less than the year high of $ 371 (Feb 12).
The following conclusions can be drawn from these three events:
- At the time of the halving, altcoin quotes were lower than the highs of the year.
- At the same time, the highs of the year were associated primarily with the growth in the value of bitcoin.
- After the halving, altcoins have yet to hit their highs for the year.
Thus, if a Bitcoin rally occurs after the halving, then the altcoin market will traditionally follow the first cryptocurrency and possibly reach historic highs.
Reasons for optimism
Undoubtedly, no expert can guarantee that after this year's halving, the value of bitcoin will enter the next rally, as it happened before. However, this can be facilitated by factors such as:
- Reducing the rate of daily Bitcoin emission as a result of halving
- Limited emission of bitcoins
- Of the 18.366 million bitcoins mined, only about 5 million BTC (worth $ 45 billion) were brought to the market for purchase and sale.
On the basis of these factors , the popular predictive model Stock-to-Flow (S2F) analytics Plan B is also built . Within the framework of this model, by the end of the year, the price of bitcoin can grow to $ 30,000, and by 2024, one BTC may be offered up to $ 288,000. Head of Pantera Capital Dan Morehead also uses S2F in its first cryptocurrency predictions:
#bitcoin could be worth $ 115,212 in August 2021 based on the Stock-to-Flow model applied to every halving.
The main thing for BTC is demand
It should be borne in mind that these forecasts will have real weight only under one condition - the demand for bitcoin will remain at the same level as now, or will grow. This is also stated in the forecasts for the development of the situation after the halving of the first cryptocurrency, modeled by CoinShares. According to the company's experts, it is the demand that will be the decisive factor in 2020, as a result of which one cannot expect a guaranteed rise in the value of bitcoin just because it happened twice in the previous two.
It is also important that transactions with BTC through decentralized platforms ultimately do not affect the market value of the cryptocurrency as much as transactions on centralized cryptocurrency exchanges. Cryptocurrency is an unusual asset that differs from classical financial instruments in that it is decentralized, which means that its price is not formed according to the same market rules as the prices of securities in the stock market.
So, according to Peter Brandt, the legendary Wall Street trader, the current policy of the US Federal Reserve, which, although it instills in investors fears about the future fate of the US dollar, will not affect the price of bitcoin in any way. Moreover, in his Twitter account, Brandt asks global questions: what percentage of world trade is carried out through cryptocurrencies and how many international corporations in the Financial Assets section have a separate line for investing in bitcoins?
It is worth remembering that many experts in the crypto industry were betting on institutional investors who were supposed to contribute to the massive adaptation of the crypto market. However, this did not happen. The strong correlation between the price of bitcoin and the dynamics of the key Wall Street indices (S&P 500, Dow Jones), which has been observed since mid-March, suggests that large investors, for the most part, now perceive bitcoin as one of the risky assets, but not as "digital gold". as stated by the analyst Mati Greenspan. At the same time, bitcoin bypasses all key stock indices in profitability since the beginning of the year, and is also one of the best investment assets of the year.
However, something else is also important here. The number of unique addresses in the Bitcoin blockchain is 652,289. In December 2017, their number was a record 1,073,000. This suggests that:
- There is now a concentration of bitcoins among a small number of investors
- Bitcoins on inactive addresses (except for addresses to which access has been lost) are used as a long-term savings tool.
Unused opportunities
These metrics once again confirm that cryptocurrencies have not yet gained mass adoption. And the point here is not so much that they cannot be used to pay directly in most countries of the world. It's all about the nuances.
In the USA, shops and cafes are allowed to accept cryptocurrencies for payment if, as a result, US dollars are credited to the accounts of outlets. This is feasible in practice with the help of automatic cryptocurrency exchangers, however, even the presence of such an opportunity did not lead to the fact that such a payment method became mainstream. Thus, according to the evaluation analyst Tommy Mustache, less than 0.0001% of the world population uses Bitcoin as a means of payment, and within kriptosfery - it is less than 5%.
Or Venezuela example:
- Uncontrollable high inflation of local currency;
- The consent of Caracas for cryptocurrencies, including the state-owned El Petro, to be used as a unit of account for goods and services.
Even so, cryptocurrencies have not gained significant acceptance.
Key points of Bitcoin halving
The current halving is unusual in that, first of all, the cryptocurrency ecosystem has finally shown that it does not consist "only of bitcoin". Moreover, the concentration of BTC in the hands of a small number of investors, as well as the lack of strong technological development of the blockchain network, does not play into its hands. And the place of bitcoin in the "Internet of values", which is the natural development of the "Internet of information", can potentially be taken by any altcoin.
At the same time, a number of countries began to use cryptocurrencies to circumvent US sanctions, including for humanitarian purposes, establishing the supply of food and important medical equipment. And the coronavirus pandemic has forced the United States and the European Union to take risks that threaten a strong devaluation of the US dollar and euro. The situation with COVID-19 actualizes the need for blockchain, as well as for digital methods of calculating and storing funds.
The hope that the arrival of institutional investors would cause a significant rise in the price of bitcoin did not materialize. And a number of prominent experts in the cryptosphere have repeatedly made mistakes in their predictions, so the current estimates of the future price of bitcoin raise questions.
We often think about what the future will be like. However, each person in the world, by his decisions, affects both his life and humanity as a whole. The creation of new and development of existing promising projects in the field of blockchain and cryptocurrencies will have a fundamental impact on how the entire ecosystem will develop. And the slippage with Facebook's Libra launch once again suggests that sometimes even small startups can implement much better solutions than large companies.
