Expert opinion on the upcoming Bitcoin halving and the new pump2021-03-14
Previous Bitcoin halvings in 2012 and 2016 led to an increase in the cryptocurrency rate. The next reduction in the reward for the mined block will take place in May 2020, and many expect another pump from it. However, there are strong arguments against this opinion.
Dmitry Shuvaev, Development Director of the industrial mining operator BitCluster, notes that miners may suffer more from halving:
“It is important to understand that Bitcoin halving will primarily affect the income of miners. If the currency price remains unchanged, the profitability will fall by half. We must take into account the complexity of the network, which has increased by 58% since June 2019. By May 2020, we expect from + 60% to + 120% to the difficulty from the current level (depending on the dynamics of the exchange rate during this period). “
At the moment, with the BTC rate of $ 8700, the cost of mining one bitcoin with the Innosilicon T3 – 50Th / s device is $ 5500. The estimated cost of mining 1 BTC with Innosilicon T3 – 50Th / s devices in May 2020 will be $ 10,000-11,000. In order for the rate of return of mining to remain at the current level, after the halving, the cost of BTC must be at least $ 18,000.
The cryptocurrency market is still too young. At the moment, there are not enough historical market events accumulated to build accurate correlations and make accurate forecasts. Yes, a reduction in miners’ rewards can lead to a reduction in the volume sold by miners, which in turn will create an imbalance between supply and demand. This can really contribute to a sharp rise in price, but, as we can see from the example of Litecoin, the surges are temporary and may be caused by completely different events. “
In his opinion, many factors affect the rate of the cryptocurrency – from the launch of futures to the statements of the authorities. That is why one cannot expect that another rally will follow the new halving. As practice shows, the cryptomarket most often reacts in the opposite way to expected events.
Suffice it to recall the hype around the launch of the platform for institutional investors Bakkt – remembering the rapid growth of the exchange rate in December 2017 after the launch of bitcoin futures, a new “native” was predicted for the main cryptocurrency. However, in reality, everything turned out differently – after the opening of the first fully regulated platform for trading bitcoin futures, BTC lost almost $ 1000 in price.
Statistics of past halvings
The graph shows that before each halving, the bitcoin rate began to rise (light blue line), which continued for some time. However, the data sample for compiling a detailed analysis is extremely small – the market has experienced only two such events. To make forecasts, you need to operate with other data. For example, fundamental analysis of supply and demand for bitcoin.
Demand or offer
Well-known cryptocurrency trader Tour Demeistr notes that Bitcoin could hold above $ 8,000 until the next split, with an investment inflow of $ 2.9 billion, thus offsetting the deflationary effect of new coins entering the network. If we assume that the growth of investments will remain constant with fewer new coins on the market, the rate must simply rise up.
A trader under the nickname PlanB published a post in 2018, in which he described in detail the behavior of the BTC rate after the halving. According to his research, growth should be expected immediately after May 2020.
There is a statistical relationship between inventory and market value. On the basis of this relationship, the S2F model was built, in which the ratio of commodity stocks (circulating units) to their flows (production per year) is considered. This model has been actively used to predict the prices of gold and silver, but it is also suitable for bitcoin. Superimposing the BTC metrics on the S2F model gives the expected bitcoin rate of $ 60,000 by the next halving. Demand is not taken into account in this method.
Smart investors know about all the factors that should affect the bitcoin rate, so they should have already adjusted the proposal in their models and took a wait-and-see attitude. That is why it is believed that the rise from $ 3,000 to $ 12,000 this year is already part of the preparations for the upcoming May event. However, analyst and TV presenter Alex Kruger doesn’t think so. He claims that the bitcoin rate is more influenced by demand than supply. Kruger is sure that the offer is completely deterministic and does not have any effect on the price, therefore, the influence of halving on the cryptocurrency rate is not directly related.