Bitcoin halving - A bullish event?
We are just mere days away from the third Bitcoin halving and the entire crypto community has one eye locked at the BTC/USD price chart, while the other is firmly planted on the countdown clock. Many investors have started looking at the halving date (12th May 2020) as a seemingly magical day when Bitcoin is suddenly going to jump back into the $20,000 zone. In this article, let’s look at the long-term effects that the halving will have on Bitcoin’s price.
Why does Bitcoin go through periodic halving?
Bitcoin is a deflationary currency, as opposed to fiat, which is inflationary. Bitcoin has a fixed upper limit of 21 million. To ensure that the influx of coins into the market remains under control, Satoshi Nakamoto hardwired the halving formula into the protocol. The formula states that after every four years or 210,000 blocks, the protocol will cut the block reward in half.
Here is a brief timeline of Bitcoin’s halving history:
Halving’s effect on the price
Historically speaking, halving has been a bullish event for bitcoin.
After the 2012 halving, the price of BTC/USD spiked by 9,336.36% to go from $12 to $1,038 within a year. The 2016 halving saw the price go from $650.63 to $2,526, within a year. For those doing the maths, that’s a 288.60% rise in price.
Currently, the BTC/USD daily chart looks like this:
Image Credit: FX Street
However, the year-long effect of this halving may not be as drastic as the previous two because of the following reasons:
Conclusion – To moon or not to moon?
So, will BTC/USD’s price go up following the halving? We believe it will because of the supply/demand equation. As use-cases increase, the demand for Bitcoin will go up, which will positively affect the price. But do we believe that the halving is solely going to be responsible for the price to return to the all-time high levels? No.
Feel free in learning more about Bitcoin in our ultimate Guide.