May 5, 2020

The Bitcoin Halving 2020 – Priced In?

piixpay blog

The long-anticipated Bitcoin Halving is approaching and we decided to take a closer look at this event.

Behind the Bitcoin Halving, there are fundamentally two important factors we need to understand first.

  1. Bitcoin block reward will be cut in 2.
  1. There will be 50% fewer Bitcoins to be released (if all miners sell their rewards).  

So, what will be the outcome?

The Good Scenario.

Let’s put things in an economical perspective. Fundamentally, an asset that gets issued (and still in demand) becomes fewer – means bigger valuation. If we only take the model of “Stock-to-flow” we will see that Bitcoin’s scarcity is a very important factor in the long run. Our friends from PlanB have put it quite nicely in chart1.

Without going much deeper in the  “Stock-to-flow” model, the basic principle is the relation of  – how much Stock (available coins) divided by the issuance of it (Flow). The same model has been used for determining prices for Gold and Silver so we can take an educated guess. So, what do we see?  

In 2021 we will be heading for 5550 blocks per month (right) and price heading above 10K. This is when we plot the available coins and the moments of halvings. The halving moments are spikes of the black line. The colour dots represent the number of blocks per month mined. The light blue dot is the price indicator and as we can see it is still in good correlation with the black line.

Chart 1

Now, this might be too good to be true since this scenario portrays a very positive picture. So, let’s assume another scenario.

The not-so-good Scenario

In general, the Halving has been always positive for Bitcoin (2012, 2016).  

They all made conditions for a Bull market, right? Hence, this time the bull market might be far.

And this because Rob Wolfram depicted an interesting chart. That shows that the bear market will be extended. Rob added deviation bands, showing Bitcoin dips prior to halving events.

Chart 2

These “clouds” around the black line are the moments where the price will hit the bottom part of the deviation and or the upper side of it. Seems that the price will hit 100K by 2022 but there wile many brutal dives between 40K and 90K.  

The chart shows also after halving there are bear markets. Like in the last halving, it took 1.5 y to turn Bitcoin bullish again. And this time might require 2x more time.  

Where do we stand from here – conclusions?

For Piixpay, Bitcoin’s halving is still a very positive event. This is due to the fact that we are entering an era of unlimited Quantitative Easing. In other words, printing money will be a norm for many Western Countries.  

This will create inevitably devaluation of assets. Your cash purchasing power is at risk. In other words, Bitcoin will start to compete with the Dollar. Thus, the demand for scarcity assets will raise. Retail will look for storing a decentralized asset and Investors will look for hedge.  

Like the Dollar and EURO, Bitcoin will eventually become an alternative currency to pay. In fact, the demand for these kinds of payment solutions will rise. If you still want to connect your crypto-system with the FIAT, then consider Piixpay a great payment gateway. With us, you can really pay anyone in crypto as recipients will get EURO. Simple as that.

To conclude.  

In these unprecedented times, we are witnessing a historical moment. As the economy and markets become more volatile – Bitcoin becomes less unstable. Because it follows its own rational logic. Math. That’s all it is.

More on the Halving:

https://www.bitcoinblockhalf.com/

https://medium.com/@100trillionUSD/modeling-bitcoins-value-with-scarcity-91fa0fc03e25

https://cointelegraph.com/news/new-bitcoin-stock-to-flow-chart-shows-bearish-periods-precede-halvings

If you are looking to pay any service provider with Crypto – then Piixpay can help!