6 Charts on Bitcoin Halving, Price and COVID-19
A Bitcoin Halving is usually followed by a bull run. How will 2020 differ?
The 2020 Bitcoin Halving is less than a month away. Will it spur a bull run?
For cryptocurrency investors, decreasing block mining rewards and the distrust in fiat (government-backed currency like the UDD) incited by the COVID-19 pandemic could create a perfect opportunity for a price rally.
Why? Because sometime in early May, mining Bitcoin (BTC) will become half as rewarding as it is today. For Bitcoin investors, rather than miners, this is a good thing. And combined with the U.S. government’s COVID-19 stimulus package, a good thing could become great.
What exactly will happen during the 2020 Bitcoin Halving? Given the cryptocurrency’s innate volatility and the general climate of volatility brought forth by the pandemic, it’s almost impossible to say. Consider these 6 charts, and make your own determination.
The following is not investment advice. It is written exclusively for educational purposes.
What Is a Bitcoin Halving?
As determined by BTC’s original code, a Bitcoin Halving is when the mining block reward is cut in half. In other words, every 210,000 blocks, it becomes 50% less profitable for miners to verify transactions in the BTC network.
Why Does Bitcoin Halve?
By designing the protocol so that the BTC reward splits every 210,000 blocks, Satoshi Nakamoto limited supply and increased the potential for demand.
At a certain point, it will become unprofitable to mine BTC. Later, it will be so difficult that it’s impossible (theoretically, there won’t be enough energy on the planet to mine an entire block ).
This is why there will never be more than 21 million BTC, a figure we’re expected to reach around 2040.
Bitcoin Halving Dates History (2009–2020)
Halvenings, as they’re referred to in crypto, occur approximately once every four years.
- 2009: The mining reward starts at 50 BTC a block.
- November 28, 2012: The first Bitcoin Halving occurs. The block reward becomes 25 BTC per block.
- July 9, 2016: The second Bitcoin Halving occurs. Now, the block reward is 12.5 BTC per block.
When Is the Next Bitcoin Halving?
The third Bitcoin Halving is expected sometime around May 12 or 13, 2020, though the exact date depends on the rate of block completion.
Bitcoin Halving 2020: What Will Happen to Bitcoin Price?
The leading market cap cryptocurrency’s price has spiked around each prior halving. Bull experts predict that, as supply shrinks, it’s price will inflate. Skeptics argue that BTC halving has already “been priced in” but there is no evidence to suggest this.
What happens to BTC price following the Halving could be anyone’s guess. However, these charts may suggest a price run.
Chart 1: What Happened Last Time? Bitcoin Halving in 2016
BTC price spiked in June at $777 USD prior to the Bitcoin Halving on July 9, 2016. It then dipped, then surpassed its June high, on December 12, 2016, with a high of $781, and maintained a bull run through early January 2018.
In other words, the 2016 Bitcoin Halving marked the start of BTC’s historic bull run, which set Bitcoin’s all-time high of $19,891 USD.
Chart 2: Bitcoin’s Halving in 2012 Also Set a High
Were there outside factors not pictured in the previous Bitcoin Halving chart that contributed to BTC’s record-breaking bull run? Of course — namely, increased accessibility and the adoption that follows.
But 2016 is not our only reference point for a Bitcoin Halving. In 2012, the first instance of decreasing the block reward rate occurred, bringing the reward down from 50 to 25 BTC (still great by today’s standards).
It also spurred a bull run leading to the crypto’s all-time high (at that date) of $230 USD for 1 BTC.
Chart 3: Bitcoin / Stock Market During COVID-19
Today, cryptocurrency is more distributed than ever, but that comes at a potential cost: some correlation with external, non-crypto factors, such a the stock market.
The above chart shows Bitcoin’s movement in relation to the S&P 500, the Nasdaq and the Dow Jones Industrial Average between April 2019 and April 2020. At the time of writing, there are a few important elements to note:
- Bitcoin price is up 33% year over year.
- The leading market cap crypto has volatility beyond the stock market, as observed between May 2019 and early March 2020.
- BTC briefly hit a low of $3,867 on March 13, 2020, it’s lowest since March 25, 2019.
- On March 9, 2020, the stock market had it’s worst single-day decline since 2008.
- Wall Street experienced its worst single-day since 1987 on March 12, 2020.
The day following a historically low for Wall Street, Bitcoin hit its lowest price since March 25, 2019. Though this shows some correlation between Wall Street and the crypto, there were other technical factors at play as well as the economic uncertainty and looming widespread unemployment in early March (Now confirmed: At the time of writing, 22 million Americans have filed for unemployment).
How will COVID-19 impact BTC price before its 2020 halving? As always with cryptocurrency, volatility is to be expected. There are, however, a few indications that the cryptocurrency is gathering strength.
Chart 4: Volume Spikes Pre-Bitcoin Halving 2020
Though less understood that price or market cap, the volume may tell us a lot about a cryptocurrency’s near future fluctuations. Volume is the amount a specific coin or token has been traded within a day.
For one, BTC volume in the past 30 days is approximately $6 billion USD higher than its 12-month average. Coupled with Bitcoin’s price hovering around $7,000, this volume may suggest demand for the crypto in anticipation of a Bitcoin Halving price spike.
A drop in volume traditionally indicates an upcoming bear market. By contrast, increased volume may suggest that a cryptocurrency’s momentum — in this case, upwards — is supported by its hodlers.
Chart 5: Price & Volume Before the Next Bitcoin Halving
BTC market cap dipped below $100 billion USD in early March 2020, losing over $50 billion of its value in a matter of weeks. However, even if Bitcoin had stayed at this level, it would have marked a stagnation — not a loss of value — from March 2019.
Bitcoin has remained a strong asset class year over year, despite the bad press surrounding it.
Chart 6: S&P 500 During COVID-19
During the same few days, the S&P 500 hit 2,304, which hasn’t happened since early February 2017. BTC’s recovery from its March low was also quicker than Wall Street’s.
In other words, Bitcoin’s price relies on factors that include but are not limited to the U.S. stock market. A major influence is the 2020 Bitcoin Halving.
While the U.S. stock market’s recovery is bolstered by the FED’s coronavirus stimulus package, Bitcoin’s is related to its halving, which marks the decrease in available BTC — in stark contrast with an increased supply of USD.
Bitcoin Halving 2020 in 6 Charts
The BTC protocol was designed to half every 210,000 (approximately every 4 years) to reduce the supply and give the virtual currency value.
Eleven years after the crypto was released — and at the start of what is sure to be another recession — Bitcoin’s innate ability to retain value contrasts with the FED’s stimulus package and its consequences for the US dollar’s value.
The above information is intended solely for educational purposes. It is not investment advice.
