Affected by the epidemic, the popularity of the reduced-production coin is gone. Can the reduction in production still bring about a bull market in cryptocurrencies?

Editor’s note: This article comes from Lianneican (ID: lianneican), author: Neicanjun.

2020 is known as the "year of production reduction" for cryptocurrencies. Many cryptocurrencies, led by BTC, will face production reductions, which is also highly anticipated by the industry. Everyone is looking forward to a magnificent market in the cryptocurrency market.

At the beginning of this year, ETC led the cryptocurrency market to a halving trend. However, due to the impact of the epidemic, the global capital market has suffered a severe setback, and cryptocurrencies have not been immune. In the past week, cryptocurrencies have experienced a sharp decline, and the prices of most crypto assets have fallen by more than half.

Today, the production cut is really coming. It is no longer our expectation, nor is it a prediction of the future, but a real fact. Today, the block height of ETC will reach 10,000,000, and the production cut will be the first.

However, ETC's performance today was not satisfactory. It fluctuated violently throughout the day, with an amplitude of 12%. The maximum drop was 7%, and it turned green near the evening, with an increase of 5%. According to Feixiaohao, the highest price of the day was 4.95 US dollars and the lowest was 4.12 US dollars.

And the overall performance of the reduced-production coins today is roughly the same as that of ETC, with both falling first and then rising.

Under the influence of the epidemic, the ETC production cuts that once led to a rise in the price of the currency are no longer as glorious as they used to be. So can the production cuts lead the market again? Especially the upcoming BTC production cuts, can we still look forward to it?

ETC: Soaring and plummeting

Today, the block height of ETC will reach 10,000,000, and it will be the first to reduce production. The block reward after the reduction will be reduced from 4ETC to 3.2ETC. The current daily production is 22,349 pieces, and after the reduction, the daily production will be 17,879 pieces.

ETC is a forked currency of Ethereum after the 1,920,000th block, and its function is very similar to Ethereum. In June 2016, TheDAO, the hottest Ethereum project, was exploited by hackers. In order to recover investors' assets, Ethereum rolled back the transaction and recovered the stolen funds, becoming the current "Ethereum" (ETH). However, some miners continued to use the original blockchain and refused to roll back the transaction, thus forming "Ethereum Classic" (ETC).

ETC firmly believes that once the blockchain starts running, its development direction will not be influenced by any central team, but will be determined by the consensus of the people involved in the entire network and the consensus of the entire network's computing power.

The new monetary policy proposed on December 12, 2017 was unanimously passed: the block reward will be reduced by 20% when the block height reaches 5,000,000, and then reduced by another 20% every 5,000,000 blocks thereafter.

Prior to this, ETC completed its first hard fork upgrade this year on January 12. At 14:26 on the same day, ETC launched the Agharta hard fork upgrade at block height 9573000. This hard fork aims to make Ethereum Classic compatible with Ethereum, achieve interoperability between ETC and ETH networks, and continuously enrich the ecology and application scenarios of Ethereum Classic. This upgrade will include EIP-145 (bitwise shift instructions in EVM), EIP-1014 (Skinny CREATE2 opcode), and EIP-1052 (EXTCODEHASH opcode).

In the secondary market, ETC has been rising since January 2020, rising to over $13 on February 6, with a price increase of more than 200% from the beginning of the year. However, after hitting a new high for the year, ETC began to fall continuously, with the price once falling to $3, a drop of 333% from the highest point this year, and has completely lost all gains since the beginning of the year.

BTC: Price has halved

The COVID-19 pandemic caused a sharp drop in the entire financial market, severely undermining market confidence, and Bitcoin was no exception. On March 12, the price of Bitcoin plummeted, falling below the $3,800 mark, hitting the largest drop in nearly six years. According to Coin data, the sharp drop on that day caused more than 100,000 people to be liquidated, and the total amount of liquidation on the entire network was US$2.93 billion, or about RMB 20.5 billion.

In addition to the impact of the epidemic, this sharp drop was also due to the combined effects of factors such as contract expiration and mortgaged assets, which ultimately led to this round of market conditions.

The plunge of Bitcoin has also made us deeply realize that there is a certain correlation between Bitcoin and global mainstream assets. Previously, Bitcoin had basically no positive correlation with gold, Nasdaq index, etc. But judging from the market performance this time, the logic of Bitcoin's decline is related to mainstream assets. It is difficult to determine whether this correlation exists when the economy resumes its upward trend in the future. But if it exists, it is good news for the market.

Furthermore, we fully realize that Bitcoin has never been a safe-haven asset. At least so far, it is still a high-volatility risk asset. At a time when liquidity is extremely tight, Bitcoin, as a high-risk alternative investment asset with the highest volatility in the world, will naturally attract funds to seek safer and more liquid assets, and the price will plummet.

In the past two days of the plunge, there are serious differences in the views of bulls and bears. Some people buy at the bottom, while others leave the market. There are still two opinions about this plunge. One is that the trend is getting worse, and we should be prepared for a bear market for a year or longer. The other is that this drop is a one-step decline, which is more painful than the previous drop. The main force took advantage of this plunge to clean up the market thoroughly and collect more chips. After the vitality is restored, BTC will become stronger. Both opinions sound reasonable.

Can we still expect the halving?

Arranged by the time of production reduction, the main digital currencies that will be reduced in 2020 are:

1. The ETC production reduction time is March 17, 2020. The block reward after halving is: 3.2 ETC.

2. The BCH halving time is April 2020, and the block reward after halving is: 6.25 BCH.

3. The BSV halving time is April 2020, and the block reward after halving is: 6.26 BSV.

4. The BTC halving time is May 2020, and the block reward after halving is: 6.25BTC.

5. The DASH production reduction time is May 2020. The block reward after halving is: 3.34 DASH.

6. ZEC halving time is October 2020, and the block reward after halving is: 6.25 ZEC

Can we still look forward to the coming production cuts? Especially the upcoming Bitcoin reward halving.

Although cryptocurrencies, led by Bitcoin, have been falling recently, Bitcoin's history over the past decade has proven its vitality.

Bitcoin is generated through PoW mining, which inputs computing power and outputs tokens. This token is supported by computing power, and it is not issued and generated out of thin air. The competition based on computing power is essentially the output of energy, and such competition also brings security to it. From this perspective, Bitcoin essentially has its value basis. The price of Bitcoin has gone from almost negligible to more than $5,000 today, with a peak of nearly $20,000. During this period, it has experienced many ups and downs, but its overall trend is upward.

In addition, from the perspective of scarcity, Bitcoin is basically comparable to gold. With the halving in 2020, the amount of new Bitcoin will drop to an annualized issuance rate of 1.7%. Bitcoin's S2F is close to that of gold (S2F measures the ratio of new supply to total supply). The current annual inflation rate of gold is about 1.7%. In other words, it will take 58 years for gold to produce the current inventory of gold. After the halving in 2020, Bitcoin's S2F will also be around 58.

In the long run, there are currently more than 18 million Bitcoins, and the final total will be 21 million. This is in stark contrast to the quantitative easing in the traditional fiat currency market. However, considering its inherent scarcity, portability, and immutability, Bitcoin will surely become "digital gold" one day in the future, and it will have the opportunity to become a "safe haven asset" in the future. Perhaps this sharp drop is a good time to enter.

But in the short term, the spread of the epidemic around the world is the biggest uncontrollable factor. This will cause people to make the right choices in the face of the crisis. Selling all kinds of non-cash assets in hand and retaining or replacing them with broad cash assets has been a way to cope with the coming cold winter.

In this case, Bitcoin cannot completely become a safe-haven asset because it has only been around for more than ten years, is very young, and has a small size. There is still a gap compared to the gold consensus that has a history of thousands of years.

China's epidemic is nearing its end, but the global epidemic is at an extremely amplified stage, especially in Europe and America. It is impossible for them to achieve the same results as China in the short term.

The financial market risks caused by this epidemic are still in the early stages of outbreak in Europe and America. Technically speaking, the US stock market has entered a bear market phase, and several major stock indexes in Europe have also entered a bear market phase. These problems are difficult to solve in the short term. Although the United States, the United Kingdom, Italy and other countries have begun to introduce corresponding mechanisms, they cannot fundamentally change the independent operating rules of the market.

Therefore, there is still great uncertainty in the Bitcoin halving situation, and investors need to control their positions.