We are just two years away from what will be the next reduction of the reward of Bitcoin. Blocks will not be giving miners 12.5 coins as now, but they will be giving 6.25. If you are a Bitcoin and cryptocurrency investor, you need to know how that can affect the price.
Bitcoin Halvening – Bullish for Bitcoin?
Since Bitcoin was created and until now, there have been just two reward reductions – something that happens every 210,000 blocks. And what do we learn from older experiences?
The first Bitcoin hard fork took place back in 2012, and the price did not immediately react. The situation remained more or less as it was before. But as soon as there was a higher demand, the free market did its job. Bitcoin reached for the first time $1,000 dollars – which now seems just a dream.
As the demand for BTC increased, the market showed that it was not able to keep the prices it had before, and they skyrocketed.
Later in 2016, the second halvening took place. And this time, the prices were different. Bitcoin was traded around $600 dollars, and $1,000 was a realistic target for Bitcoin’s price. And the same situation happened as during the first halvening. As soon as the demand increased, prices skyrocketed.
But this time, the demand was bigger (the crypto market was bigger), and the Bitcoin production was less. Logically, as soon as the demand couldn’t find the Bitcoin’s needed, Bitcoin reached $20,000 dollars in some exchanges.
Since then, the market has been falling down, and Bitcoin couldn’t recover. As it happened after the first time that the rewards got reduced and the price increased, a bear market took place for the next years.
What to Expect Then?
Glen Goodman, Bitcoin analyst and author of The Crypto Trader book, explained:
“Previous halvenings have shown negligible impact on Bitcoin’s price. This is because rather like a much anticipated interest rate cut – everybody already knows it’s going to happen way in advance.”
Some investors believe that this will create a situation in which the price of Bitcoin will not suffer drastic changes in its price. But instead, its value would smoothly accommodate to the new reality.
Chris Wilmer, Professor at the University of Pittsburgh, explained:
“Historically the cut has had very little immediate impact, although the price usually rose after. The rise in price makes sense in so far as large buyers of Bitcoins have to either buy on the market or get them through mining, and after a halvening event it forces more people to buy in the market.”
It seems that the price may feel the effect of the halvening long time after the event takes place… or as soon as buyers appear in the market.
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