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Bitcoin’s bullish post-halving effect is now realizing institutional investors
Bitcoin’s bullish post-halving effect is now realizing institutional investors
Bitcoin

Bitcoin’s bullish post-halving effect is now realizing institutional investors

By R.L. Bryer - 17 Oct 2020

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As bitcoin grows in popularity more narratives are adopted by the community and one prevalent narrative is predicated around the bitcoin halving and the effect it has on price. 

The bitcoin halving occurs every 210,000 blocks or roughly every four years when the networks block reward for miners is sliced in half. The first halving was in 2012, the second in 2016 and the 3rd was 11 May, 2020.

The latest block reward halving reduced the reward from 12.5 bitcoin per block to 6.25 units. The block reward went to 25 from 50 bitcoin per block in November 2012 and decreased further to 12.5 units in July 2016.

The event known as the halving drives the competition for block rewards further for this scarce digital asset and in past cycles to new heights. Historically, the data reveals upon the block reward reduction, ceteris paribus, the price goes to new all-time highs. 

So how was 3rd halving’s effect on bitcoin price? 

The bitcoin price is currently $11,440 and up 68.29% the last 6 months. The 3rd bitcoin halving was 156 days ago and bitcoin’s price has gone up an average of $20.12 a day since the latest halving. 

While government money is subject to the whim or dictate of the majority and a positive law framework, bitcoin’s rules are set, finite and trust-minimized through the network’s decentralized nature. There will only ever be 20,999,999.9769 bitcoins created and the idea of digital scarcity is becoming more widely accepted as bitcoin gains the trust of legacy investors.

The Federal Reserve, the United States Central Bank, recently admitted they’re seeking roughly 2% inflation annually. A target rate for inflation of 2% means less purchasing power annually for savers of the U.S. dollar. 

The 2% inflation target over 50 years leaves savers with what exactly? This is also an extremely important detail for the world’s producers and capitalists that must manage land, labor, and capital and generate revenue over time. Without the ability to save and store value, the incentive to be a low time preference firm [or individual] is reduced and therefore society will progress less and produce less.

Major Institutional Players Entering Bitcoin Market

The IMF has suggested due to the corona virus and economic shutdowns that this could be the worst economic setback since the Great Depression. Therefore, institutional investors have even greater pressure than normal to determine where to hold their value and which assets are a proper hedge against fiat currencies and debasement. 

The individuals and firms below are taking the digital gold road to storing their value and placing their wager on bitcoin. Their hopes are to minimize the affliction of a potential $9 trillion loss to the global economy and store value over time.

Michael Saylor and his company, MicroStrategy recently made headlines when they purchased 38,250 bitcoins or $425 million worth of BTC at the time of purchase. 

Tim Draper, the American venture capitalist, reportedly paid around $19 million for 29,656 bitcoins in 2014. These bitcoin had been seized by the U.S. Government upon the closure of the Dark-Web Site Silk Road and put up for auction. When you compare Draper’s investment for roughly 8,000 less bitcoin with Saylor’s investment with MicroStrategy, you quickly realize the potential of bitcoin and that time is of the essence. 

GrayScale Bitcoin Trust can apparently not get enough bitcoin currently. At times this year, it has been reported that GrayScale’s appetite for bitcoin exceeds the current market availability or is greater than 100% of available coins. In addition to their already SEC Registered Reporting Company, GBTC, just this week Grayscale also added their Ethereum Trust as an SEC Registered Reporting Company. GrayScale is really the first of its kind, a trust that offers bitcoin as a security instead of investors personally buying and accounting for storage themselves.  

Hedge fund manager and billionaire, Paul Tudor Jones, this year went public with his investment in bitcoin. He reports that between 1-2% of his net worth is in bitcoin and that trust in bitcoin is going up over time as a store of value.

A clearly defined monetary paradigm with set rules is absolutely pivotal for all individuals and firms to maximize potential and bitcoin provides an outlet to monetary sanity. Bitcoin is now garnering the respect of very wealthy investors but every low time preference individual saving in bitcoin could be rewarded in the long run, just refer to Tim Draper’s bitcoin investment and return over the past 6 years. The final act of the 3rd bitcoin halving has yet to play out, so we’ll have to wait and see if new all-time highs are just over the horizon in the coming months.

 

R.L. Bryer
R.L. Bryer

Since 2009, the onset of the bitcoin network, R.L. Bryer has been covering the space. He is the author of Blockchain: Project Renaissance Volume I and II. He's also been the guest of countless bitcoin and cryptocurrency related podcasts throughout the world. Every opportunity, he speaks on or writes about Austrian Economics and how bitcoin is the world's preeminent money.

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