Is Bitcoin going to the moon?
With the recent movements of Bitcoin, more and more people are asking what is happening. The halving has become a buzzword: what is it and why does it matter?
What is Bitcoin’s halving?
Bitcoin halving is a regular event happening in the Bitcoin network where miners will be rewarded half the amount of reward given prior to the event. This event happens approximately every four years (210,000 blocks @ ±10 minutes). So with the total cap of 21,000,000 BTC, then there will be another 97 times Bitcoin halves in the future, ending approximately in the 2400s.
At the beginning of the network, block winners received 50 BTC for every block that was mined. On 28 Nov 2012, the first bitcoin halving event happened and miners were rewarded with 25 BTC for every block mined after that. The price of Bitcoin rose from $12 to $1200 in the following year. The second event happened on 9 July 2016 and again the price of Bitcoin rose by approximately 300% followed by another 800% surge in the following 6 months.
The next question is whether Bitcoin will continue to appreciate in the following year after the halving event. Block reward will be halved to 6.25 BTC per approximately 10 minutes; this halving is going to happen within the next week (11–12 May 2020).
Why does it matter?
Many people misinterpret the halving. For example, some think that halving means the circulated amount of Bitcoin will be halved, which is untrue.
What really happens is halving of new supply. This means that the inflation of Bitcoin will decelerate, whereas for now the inflation rate of fiat currency keeps increasing with more and more central banks around the world printing more money to boost their economies amid the Coronavirus. This will certainly devalue fiat currencies and probably change opinions around fiat currencies.
What I have in mind is the faster the inflation rate of fiat, the higher the chance for Bitcoin to appreciate in price compared to fiat. This is because the supply of BTC is stable while fiat depends on policymakers’ decisions, which can sometimes be more subjective rather than objective.
Analysis
Let’s start analyzing the halving effect to the price together with the user base of Bitcoin which is according to the number of unique Bitcoin addresses created.
Price is based on Bitstamp.com’s closing price.
This data is taken from blockchain.com, showing the number of wallets created.
The million dollar question is whether Bitcoin will move just like it did in the previous halving events. Looking at the current growth of users, I won’t expect Bitcoin to rise as fast as it did around the first halving event but possibly a similar situation to 2017 could arise. From its halving to its highest point within 2 years, the total rise amounted to 2935%.
If we take ⅓ of the growth from 2016’s halving which is ⅓ x 2935% = 978.33%, Bitcoin might probably go to USD10,000 + 978.33% ~ USD107,833. Will it be there? Only time will tell.
Currently, Bitcoin has just breached its trendline that has not been broken since it was formed, from 2017’s highest point to 2019’s highest area. Confirmation would still only come if the volume of the breakout is significant. As of today, if the price of Bitcoin continues to go up, then I would say the confirmation is there. We just need to wait for retracement to enter and wait for it to go to the moon. So when lambo? Probably soon :)
If you are into Bitcoin investing, I’d suggest you not to use up more than 5% of your total investment portfolio.
Disclaimer:
Trading is risky. Any financial decision made is on your own risk, be mindful and always use risk management.
