The Bitcoin halving is expected to take place on May 13th, around 9:00 UTC time, give or take a few minutes.
| In case you are new to the land of crypto, it’s expected to be the biggest event of the year. What is it? Here is the simple explanation: “As part of Bitcoin’s coin issuance, miners are rewarded a certain amount of bitcoins whenever a block is produced (approximately every 10 minutes). When Bitcoin first started, 50 Bitcoins per block were given as a reward to miners. After every 210,000 blocks are mined (approximately every 4 years), the block reward halves and will keep on halving until the block reward per block becomes 0 (approximately by year 2140). As of now, the block reward is 12.5 coins per block and will decrease to 6.25 coins per block post halving.” Bitcoinblockhalf For investors, it means deflation. Every month 54,000 bitcoin is minted by the system to be distributed to the miners (12.5 x 10 blocks x 24 hours x 30 days). In May that will be cut down to 27,000 bitcoin. With bitcoin around $7000 USD, instead of $400 million that has to absorbed by the market, there will only be $200 million, or $2.4 billion a year. Happy times ahead for investors, or so the crypto-hype machine will have you believe. The historical record predicts a bright future for the bulls, just not right away: |
The purple highlights show the month in which the production of bitcoin was halved.
In the 12 months before the 2012 halving, bitcoin rose from $3.06 to $12.56 an increase of 410%.
In the 12 months before the 2016 halving, bitcoin rose from $280.04 to $607.37, an increase of 217%.
BUT in the 11 months before the expected 2020 halving, bitcoin has risen from $5423 to $6726. That’s an increase of only 24%
Mind you, a year-over-year increase of 24% looks pretty sweet considering we are in the midst of the greatest economic crisis since the Great Depression.
Now, after the halving in 2012, bitcoin rose from $12.56 to $946.92 an increase of 7537% and in2016, bitcoin rose from $607.37 to $2734.59 an increase of 450%.
But most of that increase happened in the last six months, not the first. For example, in 2016, six months after the halving, bitcoin went from $607 to $987, an increase of only 62%.
Therefore, based on the historical record and quite frankly taking note of the present time, (every asset everywhere, with the possible exception of gold, is sucking wind) I would not expect fireworks in the price of bitcoin until 2021.
However, I don’t expect it to tank either. The biggest monthly drop ever for bitcoin in the six months after a halving was 10% in July 2016.
I will take safe and boring for the rest of 2020 with pleasure, considering the dumpster fires that are still burning in the rest of the financial world.
DJ
Rapture Photo Photo by Brett Sayles from Pexels
