How does halving affect the price of bitcoin?
Blockchain

How does halving affect the price of bitcoin?

By Marco Cavicchioli - 12 Oct 2019

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How could the halving expected for next year affect the price of bitcoin

The first thing to do is to mention that the exact date on which the halving of the block reward for miners will take place is not yet known. 

In fact, what is certain is that it will happen at block number 630,000 and that at present the block number is close to 600,000, and it is not known with certainty when the block number 630,000 will be mined. 

According to a highly reliable estimate, the halving should occur around May 14th, 2020, although according to other estimates it could occur the week before, on May 7th. There are also those who say it could come much earlier, towards the end or even mid-April. 

In any case, the exact date will depend on how quickly the approximately 30,000 blocks that are missing will be mined to reach block number 630,000. 

So far, the block reward for miners has already been halved twice, on November 28th, 2012, when it went from 50 to 25 BTC, and on July 9th, 2016, when it decreased to 12.5 BTC. 

On November 28th, 2012 there were no particular changes to the price of bitcoin. 

Since the beginning of the year, it had gone from about $5 to $12, with a fairly slow and steady growth, and remained below $15 until mid-January 2013. At that point, however, a real rally was triggered, which caused the price to rise to $1,155 on December 5th of the same year. 

Therefore, the price slowly rose in the months before the halving and then stopped for just under a couple of months as soon as the halving itself occurred. After that, however, it soared high in the next ten months, and then the following year it collapsed down to 195 dollars on January 15th, 2015. 

Even on July 9th, 2016, there were no major price fluctuations. 

Since the beginning of the year, it had risen from about $400 to about $650, with growth concentrated mainly in the month and a half before the halving. However, starting in November, it began the rally that brought BTC, in December of the following year, to reach the absolute peak of all time, at 19,817 dollars, to then collapse to 6,300 on February 6th, 2018 and touch the new minimum at $3,204 on December 15th of the same year. . 

As a result, although the proportions and timing of the two rallies are different, the trend has been very similar. 

An increase in value between 1.5 and 2.5 times in the months prior to halving, followed by a period of relative stagnation of about two months, after which there was a real surge that lasted about a year or a year and a half. In both cases, moreover, the all-time high (ATH) was reached in December of the year following the halving, while the post-bubble low price occurred in December of the year following the previous ATH. 

Starting from the $3,204 touched last year, December 15th, 2018, to date the price has already more than doubled. So unlike the two previous cases, the price is increasing more, and faster, in the 12 months preceding the new halving. This means that the trend seems to be confirmed for now, although the proportions and timing are different. 

All this is absolutely not enough to speculate that the same thing will happen in 2020 and 2021, but since the halving of the block reward for miners is a structural change to the issuance mechanism of BTC, it is by no means unreasonable to imagine that it could provoke a reaction that is at least similar. 

The price of bitcoin is the result of trading on the free market between supply and demand and halving the increase in circulating supply can easily generate a reduction in supply. If demand does not decrease, it is indeed likely that a price increase will occur, and if demand actually increases, the price rise can accelerate considerably. 

 

Marco Cavicchioli
Marco Cavicchioli

Class 1975, Marco teaches web-technologies and is an online writer specializing in cryptocurrencies. He founded ilBitcoin.news, and his YouTube channel has more than 11 thousand subscribers.

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