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Final Hours Before the Halving – What to Expect Once Block #630,000 Has Been Mined?

Is the next bull run in the cryptocurrency market just around the corner, because of the upcoming Bitcoin halving?

Today we would like to talk about the upcoming Bitcoin halving and a few different scenarios on how it may affect the price of the cryptocurrency.

But, before we start, let's explain briefly what Bitcoin halving is. During this event, the number of generated Bitcoin rewards per block is cut in half. Thus, it also cuts in half Bitcoin's inflation rate and the rate at which new Bitcoins enter circulation.

Bitcoin halving happens approximately every 4 years and during the next one that is expected to take place at Block #630,000 later today, the block reward will decrease from 12.5 to 6.25 coins in around 4 hours.

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Source: Coin Metrics Network Data Pro

On the eve of Bitcoin halving, the price of BTC is close to the psychological level of $10,000 per digital coin.

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As seen in the chart above, on Friday, just a few days before the long-awaited event, BTC/USD was exactly in the middle of the price range between the level of the previous Bitcoin halving that happened in July 2016 and the all-time high (ATH) that formed in December 2017.

The question is: where will the price go to after the halving? Some people think that it will mark the beginning of a new bull run, while others believe that there will be a solid Bitcoin dump, but it is also possible that the halving may turn out to be a non-event for the price of the cryptocurrency.

Now we will discuss all three possible scenarios, based on different factors and opinions by experts who support them.

Positive scenario

Many Bitcoin bulls have claimed for quite some time that because of Bitcoin's inflation rate decline during the halving, the supply of new coins will decrease. Hence, supply and demand curves will intersect at a new equilibrium price, higher than the current one.

Moreover, the bulls claim that one exogenous factor that will intensify BTC's price hike is the constantly increasing amount of money (Quantitative Easing) in the global financial system, because of the loose monetary policy worldwide. Recently, Hashcash inventor Adam Back even named Bitcoin's halving a quantitative hardening if compared to the quantitative easing conducted by the central banks around the globe.

The chart below illustrates the constantly increasing amount of Money Stock (M2) in the USA:

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Source: Federal Reserve Bank of St. Louis

Based on the factors above, the bulls give price projections between $20,000 and $100,000 per one digital coin in the subsequent months after the halving. For instance, Michael Novogratz shared in Twitter once again that BTC is at the beginning of a rally and by the end of 2020, it will hit the previous ATH at the level of approximately $20,000:

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Source: Twitter

There are even more optimistic forecasts. In an interview with the Altcoin Buzz YouTube channel on May 6th, CEO of capital management giant Morgan Creek Mark Yusko said that he expects the price of Bitcoin to push past $100,000 at some point between 2021 and 2022 because Bitcoin as a digital gold is supposed the reach the market cap of the physical gold.

Negative scenario

However, some cryptocurrency enthusiasts believe that the well-known people in the crypto industry have accumulated big chunks of cryptocurrency at significantly lower levels, and now they are shilling Bitcoin and spreading positive news about the halving to attract the attention of new entrants to the crypto market and dump their Bitcoin holdings during the hype that is supposed to be triggered by the halving.

For example, a poll conducted by @CryptoDonAlt in Twitter recently shows, that among 12,220 people, 48% expect whales to dump their Bitcoin holdings:

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Source: Twitter

Besides, those claiming that whales will take advantage of the Bitcoin halving to dump the cryptocurrency at a better price level have been actively discussing the recently published study by the analytical center Sentiment, according to which, whales are reducing their Bitcoin holdings (descending brown line in the chart below), while retail investors are buying more Bitcoin (ascending pink line in the chart below):

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Source: Sentiment

Others who consider the Bitcoin halving to be a negative event for the price of the cryptocurrency give as an example the Litecoin halving that happened in August 2019. After the last LTC halving the reward pool decreased and many miners left the Litecoin ecosystem, which has led to a solid decrease of the hash-rate and, therefore, the cryptocurrency has become less secure and its price has dropped:

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Source: Bitinfocharts

Neutral scenario

However, many crypto enthusiasts are proponents of the traditional investment theory (also known as the efficient market hypothesis), according to which, a well-known and long-awaited event that is supposed to happen is usually incorporated into the prices in advance because it is not a surprise for the market participants.

Usually, in efficient markets, players try to estimate in advance the effect of an important event and they prepare for it before it happens. That's why many Bitcoin miners/mining farms are switching to new, more efficient mining devices to remain profitable and not to be forced to shut down their business once the reward pool halves. Also, they have been negotiating new electricity contracts with local authorities to be able to face potential negativity from the reward pool reduction.

For example, famous Bloomberg analyst Mike McGlone described the halving as a "non-event" a couple of weeks ago in an interview with Cointelegraph. He referred to the efficient market hypothesis, which suggests that all the known information is already priced in – miners, big investors, etc., have already prepared for the halving.

Conclusion

In this article, we wanted to share different points of view (to some extent even controversial) from experts on the upcoming halving. Although everyone has a different stance on the potential short- and mid-term effect on Bitcoin's price, because of this important event, we would like to highlight that during the halving and in the subsequent days, we may witness high price volatility and chaotic price movements. That's why we would like to warn you to be very careful.

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The article is purely informational and does not constitute investment, financial, trading, or any other sort of advice and you should not treat any of Bitvalex's content as such. Bitvalex does not recommend that any cryptocurrency should be bought, sold, or held by you. You are solely responsible to conduct your own due diligence and consult an advisor before making any investment decisions.


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