Can the 2020 Bitcoin Halving Drive the Price of Bitcoin to $80,000?

With the rise of digital currencies, Bitcoin has attracted more and more investors' attention. In order to prevent Bitcoin from being mined out quickly as computing technology develops, Satoshi Nakamoto designed a Bitcoin halving mechanism: every 210,000 blocks mined, the packaging reward will be halved. This mechanism also makes Bitcoin a deflationary currency. Today, let's talk about Bitcoin halving.

What is Bitcoin Halving?

The issuance of Bitcoin does not rely on individuals or teams to decide, but through a process called "mining". People obtain the right to create new blocks by solving cryptographic problems and thus get rewards. It can be said that new Bitcoins are created to reward miners for verifying blocks, which is essentially the way new Bitcoins are issued.

According to the rules designed by Satoshi Nakamoto, the reward will be halved every 210,000 blocks (about 4 years). This is what we call the Bitcoin halving event.

The first Bitcoin halving was at the end of 2012, when the 210,000th block was rewarded with 50 bitcoins, but the 210,001st block was only rewarded with 25 bitcoins.

The second halving occurred in mid-2016, and the reward was halved again, so that the reward for mining the 420,001st block was 12.5 bitcoins.

The next halving will take place around May 19, 2020, when the block reward will be reduced directly from 12.5 bitcoins to 6.25 bitcoins.

It will continue to halve in 2024, which means that the reward for each block will be only 3.125 bitcoins, and will decrease from then on.

Why does the Bitcoin halving happen?

This problem can be explained by the law of supply and demand. If the speed of Bitcoin mining is too fast and there is no limit on the issuance, then there will eventually be a large number of Bitcoins circulating in the market. If the supply increases and the growth of demand cannot keep up with the growth of supply or the demand is still decreasing, then what value is there?

Ethereum founder Vitalik Buterin once wrote an article explaining the necessity of slowing down the issuance of Bitcoin through mining:

The main reason for doing this is to curb inflation. Traditional fiat currencies controlled by the central bank have a disadvantage - banks can print as much money as needed. If too much money is printed, the law of supply and demand will cause the currency to depreciate rapidly.

Bitcoin, on the other hand, has commodity properties like gold. The amount of gold in the world is limited, and with each gram of gold mined, the difficulty of obtaining gold increases. Due to the limited supply, gold has maintained its role as an international medium of exchange and store of value for more than 6,000 years, and I hope that Bitcoin will do the same.

Then you will definitely ask, what impact does Bitcoin halving have on Bitcoin prices?

No one can be sure about this question, because looking at the halving events in history, it was hundreds of days after the halving that the price of Bitcoin rose. From this perspective, the direct connection is not very strong.

For example, when Bitcoin halved for the first time in 2012, the price was around $12. 369 days after the halving, that is, one year later, the price of Bitcoin reached an all-time high of around $994.

Let’s take a look at the second Bitcoin halving event on July 9, 2016. The price at the time was around $650. 526 days after the halving, on December 16, 2017, it reached an all-time high of around $19,500.

It seems that the halving does not seem to have any direct impact on the price, but the overall trend is upward. Let’s calculate it according to a more ideal state.

The first time from halving to the historical high, it rose by about 8000%, and the second time from halving to the historical high, it also rose by about 3000%. Now there are about 8 months away from the next halving. According to the rhythm before the first two halvings, assuming that the current price of more than 8,000 US dollars can be maintained during the halving, then according to historical experience, if the third halving can have a 1000% increase (lower than the previous two increases of 8000% and 3000%), then it will reach about 80,000 US dollars.

If we look at this from the current perspective, this may be a bit crazy, but from the perspective of the future, no one knows what will happen. Maybe the market will not follow the usual routine and there will be a big drop?

But why do many people still firmly believe that halving will lead to an increase in coin prices?

There may be two reasons for this problem:

1. Increased miner costs

Who is most sensitive to the halving of Bitcoin production? Naturally, it is the miners, the guardians of the Bitcoin blockchain.

If the output is halved, it can be narrowly considered that the mining cost will double, that is, the miner's cost has not changed, but the output is only half. When miners lose money, they will only take two actions. The first is to hoard coins and wait for the price to be higher than the cost line. The second is to shut down and stop mining, which will lead to the adjustment of computing power and then dynamically balance the price of coins.

Miners currently have a lot of say in the Bitcoin ecosystem, so it can be said that halving will lead to an increase in the price of the currency.

2. All stocks are bought based on expectations

Everyone who buys stocks is buying their expectations, because there will be favorable factors in the future, the current value is underestimated, and so on. All the reasons for buying are because of optimism about the future. There is still one year left before the halving, and the currency circle already has a strong subjective consciousness about the Bitcoin halving. This consciousness is a consensus among the public.